Deal Size, Acquisition Premia and Shareholder Gains
Journal of Corporate Finance (Forthcoming)
36 Pages Posted: 11 Mar 2011 Last revised: 13 Nov 2012
Date Written: September 30, 2012
This study examines the contradictory predictions regarding the association between the premium paid in acquisitions and deal size. We document a robust negative relation between offer premia and target size, indicating that acquirers tend to pay less for large firms, not more. We also find that the overpayment potential is lower in acquisitions of large targets. Yet, they still destroy more value for acquirers around deal announcements, implying that target size may proxy, among others, for the unobserved complexity inherent in large deals. We provide evidence in favor of this interpretation.
Keywords: Public Acquisitions, Target Size, Premium, Acquirer Returns
JEL Classification: G14, G30, G34
Suggested Citation: Suggested Citation