Bidder-Specific Synergies and the Evolution of Acquirer Returns
73 Pages Posted: 19 Aug 2019 Last revised: 16 Dec 2020
Date Written: December 15, 2020
Largely constant average acquirer returns over the past four decades mask fundamental changes in the takeover market. Controlling for bidder composition, the common component of acquirer returns has increased by five percentage points relative to the 1980s. Offsetting this increase, the average bidder-specific component has declined. We propose a theory of bidder-specific synergies to help interpret these opposing trends. In our theory and in the data, acquirer returns increase with the extent to which synergies are unique to that bidder. The composition effect reflects bidder uniqueness. Overall, the evidence is consistent with rising merger synergies that have become less bidder-specific.
Keywords: Mergers and acquisitions, acquirer returns, bidder-specific synergies, bidder uniqueness
JEL Classification: G14, G34
Suggested Citation: Suggested Citation