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Failed acquisition offers: The impact of failure reasons on target valuation

Author

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  • Even-Tov, Omri
  • Lourie, Ben
  • Nekrasov, Alex
  • Zeng, Jean (Jieyin)

Abstract

Using a large hand-collected sample of 1,246 failed acquisition offers from 1979 to 2016, we examine the effects of failure reasons on the revaluation of target firms. We find a negative revaluation of -16 % for failures not caused by target rejection, suggesting exposure of adverse information about the target's economic conditions. Conversely, targets declining offers show a positive revaluation of +7 %, indicating target management's private information about the firm's superior prospects. These revaluation effects are stronger for hard-to-value targets, consistent with failure reasons revealing more information when there is greater uncertainty about the target's value.

Suggested Citation

  • Even-Tov, Omri & Lourie, Ben & Nekrasov, Alex & Zeng, Jean (Jieyin), 2024. "Failed acquisition offers: The impact of failure reasons on target valuation," Finance Research Letters, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003520
    DOI: 10.1016/j.frl.2024.105322
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    References listed on IDEAS

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