Extraordinary Acquirers

Abstract

a b s t r a c tFirm fixed effects alone explain as much of the variation in acquirer returns as all the firm-and deal-specific characteristics combined. An interquartile range of acquirer fixed effects is over 6%, comparable to the interquartile range of acquirer returns. Acquirer returns persist over time, but mainly at the top end of the distribution. Persistence continues under different chief executive officers (CEOs), and attributes of the broader management team do not explain the fixed effect. Firm-specific heterogeneity in acquirer returns suggests that some organizations are extraordinary acquirers irrespective of the leadership at the top and the deal structures they choose. Implications for the M&A research are discussed.

Do investment banks create value for their clients? Empirical evidence from European acquisitions

“…In line with Rosen (2006), it seems that runup is negatively related to bidder CARs. Sigma appears to have a positive effect on bidder value creation, which is in line with the findings of Golubov et al (2015). In the following specifications, I use interaction terms between the advisor dummy and targetbidder-regime combinations to better understand the role of advisors and to utilize the differences across European regimes.…”

“…I exclude bankruptcy acquisitions, divestitures, going private transactions, leveraged buyouts, management buyouts, liquidations, repurchases, restructuring transactions, reverse takeovers, and privatizations. These screening criteria are common in this stream of literature (see, e.g., Golubov et al, 2012;Golubov, Yawson, & Zhang, 2015;Harford, Humphery-Jenner, & Powell, 2012;Masulis, Wang, & Xie, 2007). I complement my sample with bidder characteristics from Compustat Global and retrieve stock prices and indices, which are adjusted for stock splits and dividends, from Datastream.…”

“…I do this because financial institutions have different characteristics than corporate firms. 4 I require that acquisition value exceeds 1% of bidder market capitalization 11 days prior to the announcement and drop all acquisitions in which the same bidder acquires several firms on the same day (see, e.g., Golubov et al, 2015). This is important because it is otherwise difficult to isolate the bidder returns for a specific acquisition (Fuller, Netter, & Stegemoller, 2002).…”

Large Wealth Creation in Mergers and Acquisitions

“…In addition, Table III indicates that some of the acquirer firms we study execute multiple acquisitions (serial acquirers), while other acquirers engage in both large gain deals and large loss deals. Moreover, Golubov et al (2015) find that acquirer returns are best explained by an unobserved, time-invariant, acquirer firm-specific factor. Because of these issues, Table IV includes both year and acquirer firm (or industry) fixed effects.…”

“…Our results concerning the importance of deal-specific characteristics for value creation/destruction during acquisitions are robust to the inclusion of acquirer firm fixed effects in our tests. The addition of firm fixed effects appears to be important given the conclusion in Golubov, Yawson, and Zhang (2015) that takeover gains are characterized by significant (acquirer) firm-level persistence.…”