Abstract
In most cases market returns around merger announcements are difficult to interpret as the announcement of a bid usually conveys more information than the synergy from combination. Using a unique, hand-collected dataset on terminated merger proposals, we investigate termination returns in deals canceled for exogenous reasons unrelated to the bidder's valuation. This methodology permits a new assessment of value improvements from acquisitions. We find that bidder gains and losses vary significantly with the type of target acquired. Further evidence suggests that the liquidity needs of private targets significantly contribute to the positive gains to bidders.
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