Target Shareholder Returns: their Magnitude and Determinants following Takeover Announcements by Domestic and International Acquirers

    Research output: Contribution to conferencePaperpeer-review

    Abstract

    Synergy is frequently cited as the motive behind much of the global merger and acquisition activity. A large volume of empirical evidence suggests target shareholders gain substantially with acquirers experiencing small losses or at best a break-even position. Most of the studies focus primarily on domestic transactions and on bid characteristics in an attempt to explain potential value changes. Whilst recent research, largely in the US context, has started to take place on the implications of international acquisitions, there is a scarcity of evidence in the UK. The aim of this paper is to address this shortcoming and to examine the magnitude and determinants of value changes to shareholders of target firms. This study uses a specially constructed data set covering 299 takeover announcements for publicly quoted UK target firms by both domestic and international firms over the period 1990 to 1998. The volume of transactions is considerably higher in the 1995-98 period in contrast to 1990–94 era. Average bid value does not differ across country of acquirer. It is found that target firms are characterised by high levels of institutional ownership. The results suggest engagement in the merger process appears to improve the welfare of target shareholders while the determinants of value changes indicate that corporate governance proxies, relative firm performance and bid features do help explain potential returns. It is concluded that mergers and acquisitions continue to play an important role in restructuring the corporate landscape in the UK with total value of bids in our sample amounting to £160 billion.
    Original languageEnglish
    Publication statusUnpublished - 2006
    EventIrish Accounting and Finance Association Annual Conference - DCU, Dublin, DCU, Dublin
    Duration: 03 Jan 0001 → …

    Conference

    ConferenceIrish Accounting and Finance Association Annual Conference
    CityDCU, Dublin
    Period03/01/0001 → …

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