Bidder Discounts and Target Premia in Takeovers

22 Pages Posted: 21 Jun 2002 Last revised: 13 Feb 2021

See all articles by Boyan Jovanovic

Boyan Jovanovic

New York University - Department of Economics

Serguey Braguinsky

Carnegie Mellon University - Department of Social and Decision Sciences

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Date Written: June 2002

Abstract

When a takeover is announced, the sum of the stock-market values of the firms involved often falls, and the value of the acquirer almost always does. Does this mean that takeovers do not raise the values of the firms involved? Not necessarily. We set up a model in which the equilibrium number of takeovers is constrained efficient. Yet, upon news of a takeover, a target's price rises, the bidder's price falls, and, most of the time the joint value of the target and acquirer also falls.

Suggested Citation

Jovanovic, Boyan and Braguinsky, Serguey, Bidder Discounts and Target Premia in Takeovers (June 2002). NBER Working Paper No. w9009, Available at SSRN: https://ssrn.com/abstract=316788

Boyan Jovanovic (Contact Author)

New York University - Department of Economics ( email )

19 w 4 st.
New York, NY 10012
United States

Serguey Braguinsky

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States

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