Deal initiation in mergers and acquisitions

Masulis, Ronald W. and Şimşir, Şerif Aziz (2018) Deal initiation in mergers and acquisitions. Journal of Financial and Quantitative Analysis, 53 (6). pp. 2389-2430. ISSN 0022-1090 (Print) 1756-6916 (Online)

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We investigate the effects of target initiation in M&As. We find target-initiated deals are common and that important motives for these deals are target economic weakness, financial constraints, and negative economy-wide shocks. We determine that average takeover premia, target abnormal returns around merger announcements, and deal value to EBITDA multiples are significantly lower in target-initiated deals. This gap is not explained by weak target financial conditions. Adjusting for self-selection, we conclude that target managers' private information is a major driver of lower premia in target-initiated deals. This gap widens as information asymmetry between merger partners rises.
Item Type: Article
Divisions: Sabancı Business School
Depositing User: Şerif Aziz Şimşir
Date Deposited: 06 Jun 2023 12:36
Last Modified: 06 Jun 2023 12:36

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