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Industry asset revaluations around public and private acquisitions

Author

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  • Derrien, François
  • Frésard, Laurent
  • Slabik, Victoria
  • Valta, Philip

Abstract

Revaluations of industry peers around horizontal acquisitions are negative when targets are private, but positive when they are public. We posit this “revaluation spread” arises because acquiring managers favor private targets when public firms are overvalued. Targets’ ownership status thus conveys information about industry assets’ misvaluation and triggers predictable revaluations. Supporting this idea, private acquisitions occur when private targets appear “cheaper” than public firms based on valuation multiples or the trading activity of industry insiders. The revaluation spread varies with overall market misvaluation, predicts future industry returns, and is unrelated to peers’ and industries’ fundamentals.

Suggested Citation

  • Derrien, François & Frésard, Laurent & Slabik, Victoria & Valta, Philip, 2023. "Industry asset revaluations around public and private acquisitions," Journal of Financial Economics, Elsevier, vol. 147(1), pages 243-269.
    • Handle: RePEc:eee:jfinec:v:147:y:2023:i:1:p:243-269
    DOI: 10.1016/j.jfineco.2021.10.003
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    Cited by:

    1. Li, Dongxu, 2024. "Horizontal mergers and heterogeneous firm investments: evidence from the United States," Journal of Empirical Finance, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    Merger & acquisitions; Information; Revaluation; Stock returns; Peers; Misvaluation;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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