The determinants and effects of actual, abandoned and contested mergers

Abstract

This paper reports the results of research aimed at exploring why some takeover bids give rise to merger while other do not and, using as a basis of comparison matched samples of actual and abandoned mergers, the performance effects of mergers. In this work, 50 cases of abandoned mergers occurring between 1965 and 1975 were analysed against a matched sample of 50 actual mergers. In addition, 33 cases of contested bids were also analysed. Variables used reflected managerial, shareholder and financial strength considerations. Analysis covered a period three years before to three years after each bid. Techniques of analysis were differences of means and discriminant analysis. The results show that there are important differences between target companies that are acquired and those that successfully resist takeover bids. They also show the influence of managerial and financial variables as the key to a successful takeover bid rather than variables reflecting shareholder interests. Analysis of the effects of the outcome of the bids suggests that companies involved in abandoned mergers recorded a stronger performance over the subsequent 1–3 years than those that made acquisitions, especially where shareholder and financial considerations are concerned. Target companies that resisted takeover bids showed a significant performance improvement.

Rhetoric, argument and impression management in hostile takeover defence documents

“…Similarly, offer rejection notifications relating to contested bids were excluded. A contested takeover bid is defined as one in which there are multiple bidders for the same target at the same time, where target company management is not necessarily opposed to takeover (Pickering, 1978;Holl & Pickering, 1988;Parkinson & Dobbins, 1993). The third stage excludes offer rejection notifications which relate to the same hostile takeover bid.…”

Managerial and Disciplinary Responses to Abandoned Acquisitions in Bidding Firms: A New Perspective

“…However, is abandonment the disciplinary finale? Several studies find ambiguous evidence surrounding discipline in bidders after abandoned bids (see Pickering, 1988 andTaffler &Holl, 1991). However, this work is dated and focuses on narrow financial measures of performance after abandonment.…”

Getting cold feet?

“…Holl and Pickering (1988), Akhigbe et al (2000), Branch and Yang (2003), Maheswaran and Pinder (2005), and Aguilera et al (2007) found that mergers between organizations with comparable sizes are less likely to be completed than mergers between organizations with a different size. Perhaps because small organizations do not try to resist the wishes of the larger organizations, especially if it is a hostile takeover, whereas equally sized organizations collide over merger conditions.…”