Beyond the Target: M&A Decisions and Rival Ownership
60 Pages Posted: 18 Aug 2018 Last revised: 2 Jul 2021
Date Written: September 25, 2020
Diversified acquirer shareholders can profit from value-destroying acquisitions not only through their target stakes, but also through stakes in non-merging rival firms. Announcement losses are largely mitigated for the average acquirer shareholder when accounting for wealth effects on their rival stakes. Ownership by acquirer shareholders in non-merging rivals is negatively associated with deal quality and positively associated with deal completion. Funds with more rival ownership are more likely to vote in favor of the acquisition. Overall, these results show that many so-called “bad deals” are often in the interest of acquirer-firm shareholders.
Keywords: Common Ownership, Mergers and Acquisitions, Synergies, Institutional Investors
JEL Classification: G23, G30, G34
Suggested Citation: Suggested Citation