Who Gains from Buying Bad Bidders?

We study the value gains from takeovers of firms with poor acquisition histories. We document that the premium received by target shareholders is higher when the value loss from the targets’ prior acquisitions is larger. However, the gains to target shareholders seem to be offset by losses to acquiring shareholders. The average announcement return to acquiring shareholders is negative and decreasing in the value loss from the targets’ prior acquisitions. Additionally, the combined acquirer-target value created in these takeovers is insignificant. These results suggest that the value lost from targets’ prior acquisitions is not recovered through changes in corporate control.

Organisational learning theory predicts that firms should get better in Merger and Acquisition (M&A) deals with experience. Yet, existing studies on acquisition learning document decline in acquirer gains with acquisition experience. The lower gains in subsequent acquisition deals are likely induced by exogenous factors which can conceal the acquirer’s potential to learn with experience. To tackle this issue, this study examines the value of M&A experience by concentrating on the target firms’ prior acquisitions and investigates whether experienced deal-makers learn to negotiate the deal in favour of their shareholders when they are taken over by other firms. I find that the value created by the acquirer is inversely related to the deal-making experience of the target firm and the premium received by the target shareholders is positively related to the target’s deal-making experience. Our findings offer valuable contributions to the M&A learning literature as they suggest that deal-making skills improve with experience resulting in target firms securing more benefits for their shareholders at the expense of acquirers.

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">This study proposes a corporate control hypothesis in which equity carve-outs facilitate changes in corporate control by providing an economical means to transfer control of corporate assets to bidders who will potentially create greater value.<span style="mso-spacerun: yes;">  </span>Consistent with this hypothesis, a statistically significant 16% of the equity carve-outs in this study's sample are taken over within six years.<span style="mso-spacerun: yes;">  </span>Those equity carve-outs subsequently taken over appear to be economically different from those motivated by other reasons.<span style="mso-spacerun: yes;">  </span>Parent firms of equity carve-outs subsequently taken over display a significantly greater share price reaction to the announcement of an equity carve-out than do parent firms of equity carve-outs not subsequently taken over.<span style="mso-spacerun: yes;">  </span>For those carve-outs subsequently taken over, an important factor contributing to parent firm gains is the relative size of the carve-out IPO.<span style="mso-spacerun: yes;">  </span>There appears to be an optimal retention level of 10-50% for carve-outs motivated by the intent to facilitate a change in corporate control.<span style="mso-spacerun: yes;">   </span></span></span><strong style="mso-bidi-font-weight: normal;"></strong></span></p>

This paper examines the relation between capital markets and corporate control in France, Germany and the UK. It compares levels of takeover activity in the three countries and describes the degree to which takeovers are associated with changes in corporate control. The paper examines the influence of regulation on forms of corporate ownership and control. It compares regulation pertaining to the rights of employees, managers and shareholders in the three countries and finds that regulatory rules are related to patterns of ownership and control changes. The paper suggests that a fundamental objective of control changes is to correct managerial failure, and that takeovers are suited to the correction of particular classes of managerial failure that cannot be readily rectified by contracts. Thus, markets with low levels of takeovers may suffer from a low level of correction of managerial failure. However, by changing ownership, takeovers may give rise to an inability of owners to commit themselves to the long-term interests of managers and employees. As a consequence, financial systems with active takeover markets may be associated with inadequate investment in firm-specific assets and an unduly short-term investment horizon. There is, therefore, a tradeoff between alternative methods of correcting managerial failure. This is particularly important for European countries facing an extension of UK takeover activity to the Continent. The process is being encouraged by the European Commission which aims to harmonize regulation on a UK-style takeover code. Harmonization of regulation may have far-reaching consequences for the structure of different countries' capital markets and, in view of the tradeoff, is of uncertain merit.

This paper investigates the role of Venture Capital (VC) in the likelihood of delisting via mergers and acquisitions (M&A) for European companies listed in the 2004–2014 period, till 2020. Takeovers of listed companies are generally associated with underperformance, suggesting a need for a change in corporate control. In contrast, we show that VC-backed listed companies are more likely to be acquired when they exhibit higher growth rates compared to their peers. Moreover, this effect is driven by companies backed by low-reputation VCs. These VCs are known to rush their portfolio ventures to IPO and to have a limited post-IPO involvement. These conditions, combined with strong growth, may attract acquirers who perceive a need for change in corporate control. Conversely, we find no evidence of an increased likelihood of delisting by M&A in companies backed by highly reputed VCs, which tend to remain independent.

Refinancing, Debt for Equity Agreements and Takeover Bids Under Spanish Law

This study examines spatial shifts across Chinese cities between 2002 and 2018 in corporate control due to mergers and acquisitions (M&As), which are important for the Chinese urban system based on the command-and-control criteria. Descriptive results indicate that the spatial reallocation of corporate control in China has been largely dominated by metropolises, provincial capitals, and urban agglomerations. Evidence of geographical dispersion of corporate control has been found from the enlarged gains or losses in some inland and lower tier cities. Regression results underline the crucial roles that are played by regional comparative advantages, corporate demography, and government intervention in the disparate positions of Chinese cities in the M&A network. Regional economic development, output efficiency, and spatial agglomeration of listed enterprises have significantly positive effects in converging or exporting corporate control for places. Moreover, cities with higher administrative levels and policy support from the state tend to experience a net gain in corporate control. We suggest that state-led policies in emerging economies should focus on the positive impacts of corporate M&As in acquiring external assets and promoting regional integration. This study will not only advance our understanding of the geography of domestic M&As in emerging economies but also provide an alternative perspective on the dynamics behind changes in city networks.

This study examines the average abnormal returns, average abnormal trading volume, and reported insider trading of corporate control target firms during a period of possibly informed trading. This period begins on the unpublicized initiation date (as reported in a postannouncement date proxy statement or 14-D1) and ends on the publication date of the first Wall Street Journal story signalling an impending change in corporate control. We find that the preannouncement date average abnormal return noted by other researchers begins after the unpublicized initiation date of the transaction. We find no evidence of the preannouncement date average abnormal trading volume noted by previous researchers; instead, we find average abnormal volume beginning with the first public information regarding the transaction.

“Death becomes her”: Market reaction to the death of controlling inside blockholders

The Effect of Director Expertise on Acquisition Performance

The effect of director experience on acquisition performance

Unique factors in commercial banks' legal and regulatory environment may influence their mechanisms of corporate control. I investigate this issue in a sample of U.S. bank holding companies (BHCs) by analyzing how many underwent a change in corporate control by hostile takeover, friendly merger, management turnover by the board, or intervention by regulators. I compare the relative importance of these methods with those in nonfinancial firms. 1 relate the use of these methods to BHC board and ownership structure and performance. I find that the most important corporate control mechanism in banks is regulatory intervention, and that the primary market‐based corporate control mechanism is action by the board of directors. Overall, however, BHC boards are much less assertive than their counterparts at nonfinancial firms. I examine reasons for this.

企業結合規制の整備は、コーポレート・ガバナンス規制の整備と並んで、二〇一四（平成二六）年改正会社法（以下「平成二六年改正法」という）の最も重要な課題であった。平成二六年改正法は、企業結合規制として、多重代表訴訟（会社法八四七条の三第七項）や特別支配株主の株式等売渡請求権（会社法一七九条一項）等、親会社・その株主のための規制を導入した。そもそも企業結合法は、親会社から子会社の少数派株主・債権者を保護する目的で世界最初にドイツで導入された1)。しかし、日本の平成二六年改正法では、子会社の少数派株主・債権者保護のための規制は取り入れられなかった。Regulation of corporate groups was first properly introduced into Japan with the 2014 amendments to the Companies Act. The new rules regulate the formation of corporate groups through changes in corporate control with methods such as new share issuances (article 206-2 etc), multiple derivative actions (article 847-3 etc), and cash-outs of minorities by special controlling shareholders (articles 179 et seq.). These rules are aimed at protecting the economically privileged parent companies or their shareholders, not the weaker minority shareholders of subsidiaries or creditors. Is the regulation of corporate groups now complete with the above measures, or does Japan need further legislative intervention in this field? This paper aims to highlight the issues of Japan’s law on corporate groups going forward.

Effects of Mergers and Acquisitions on Shareholder Wealth: Event Study for Latin American Airlines

This article analyzes ownership restructuring and changes in corporate control in four large Latin American countries—Argentina, Brazil, Chile, and Mexico—during the 1990s. Drawing on original firm‐level data, this is a comparative study aimed at identifying cross‐country differences and regularities. It focuses on transactions associated with privatizations and private mergers and acquisitions (M&As)—their evolution, relative importance, and sectoral incidence—as well as the role played by different types of investors: local, foreign, and joint ventures. A specially built database was used in the analysis, comprising 3,085 private M&As and 329 privatization transactions. Although similar to processes occurring elsewhere, it is argued that ownership restructuring in Latin America was facilitated and fostered by specific changes in policy‐associated institutional framework conditions. That is, the wide‐ranging process of ownership restructuring is strongly associated with economic liberalization, which has become the main feature of Latin American national regimes of incentives and regulation.