Abstract
We investigate the effects of the deal initiator in mergers and acquisitions. We find target-initiated deals are common and that important motives for target-initiated deals are target economic weakness, financial constraints and negative economy-wide shocks. We document 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 condition. Adjusting for self-selection, we conclude that target managers’ private information is a major driver of lower premia in target-initiated deals and this gap widens as information asymmetry between merger partners rises.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
