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A Financial Analysis of Acquisition and Merger Premiums

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  • Nielsen, James F.
  • Melicher, Ronald W.

Abstract

The current merger movement has been characterized by the willingness of the management of some acquiring companies to pay substantial merger premiums. A merger premium exists when the common stockholders of an acquired company receive cash and/or securities possessing a value greater than the company's premerger market value. The rationalization or justification of these “premiums” is based on a merger synergy concept. Contemporary merger literature recognizes two broad forms of merger synergy — the potential for greater operating efficiencies [14] and/or potential financial benefits — with the latter containing instantaneous [12] and real elements [1, 7, 9, 10, 11, 13].

Suggested Citation

  • Nielsen, James F. & Melicher, Ronald W., 1973. "A Financial Analysis of Acquisition and Merger Premiums," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 8(2), pages 139-148, March.
    • Handle: RePEc:cup:jfinqa:v:8:y:1973:i:02:p:139-148_01
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    Cited by:

    1. Alnoor Bhimani & Kjell Hausken & Mthuli Ncube, 2010. "Agent takeover risk of principal in outsourcing relationships," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 12(4), pages 329-340.
    2. Roberto J. Santillán Salgado, 2004. "Application Of The Real Options Methodology To Value A Cement Firm'S Acquisition," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 3(4), pages 313-331, Diciembre.
    3. Chen, Wenchuan & Liu, Yu & Liu, Siyi & Chen, Yugang & Zhang, Pengdong, 2024. "The governance effects of social media engagement on M&A outcomes: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).

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