Bidder Gains and Losses of Firms Involved in Many Acquisitions

Posted: 24 Nov 2006

See all articles by Antonios Antoniou

Antonios Antoniou

Wealth Associates

Huainan Zhao

Loughborough University - School of Business and Economics

Dimitris Petmezas

Durham University Business School

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We examine shareholders' wealth effects (both in the short- and the long-run) of UK frequent bidders acquiring public, private, and/or subsidiary targets with alternative methods of payment between 1987 and 2004. We find that, in the short-run, bidders break even when acquiring public targets and gain significantly when buying private and subsidiary targets. This result is robust after controlling for relative size, bidder's book-to-market ratio, target origin, and industry diversification. Our long-run evidence, however, reveals that acquirers experience, significant wealth losses regardless of the target type acquired, indicating that markets may initially overreact to the acquisition announcement. As a result, we argue that contrary to Fuller et al. (2002) who suggest that acquiring private and subsidiary firms creates value for bidding firms, a reliable conclusion on bidders' shareholders wealth effects cannot be based solely on a short-run event study.

Keywords: mergers & acquisitions, frequent bidders, method of payment, public/private/subsidiary targets, short/long-term wealth effects

JEL Classification: G14, G34

Suggested Citation

Antoniou, Antonios and Zhao, Huainan and Petmezas, Dimitris, Bidder Gains and Losses of Firms Involved in Many Acquisitions. Journal of Business Finance and Accounting, Forthcoming, Cass Business School Research Paper, Available at SSRN:

Antonios Antoniou

Wealth Associates ( email )

Alpine House,
Honeypot Lane
London, NW9 9RX
United Kingdom

Huainan Zhao

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
United Kingdom

Dimitris Petmezas (Contact Author)

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

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