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Article Review - Friendly Merger Evaluation

Here is an article I need to look at in further detail:

In particular, I have been asked to examine the methodology employed by the researchers as well as their key finding and an explanation of a gap, if there is one.

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Are Friendly Acquisitions Too Bad for Shareholders and Managers? Long-Term Value Creation and Top Management Turnover in Hostile and Friendly Acquirers

Previous research has documented that shareholders of target firm experience significant wealth gains while bidders show both small positive and negative abnormal returns. Positive returns for both acquirer and target depend on the type of acquirer. There are two types of acquisitions-
- Friendly merger: Driven by synergy considerations, these are agreed upon by managements of target and acquirer.
- Hostile takeover: Driven by underperforming target company, these are resisted by target managements.

There is empirical evidence to show that hostile acquisitions are identified with acquisitions failing to create value. Hostile takeovers are depicted as raiders or intruders who destroy well set organizations in pursuit of greed. On the other hand friendly acquirers are welcomed by target organizations as they are called for help by target organizations in time of distress. As a result acquirer works with the management of target to get better understanding of target firm and hence can create better synergies than hostile bid where such advantages are not available. On the surface hostile bids are not attractive to bidders because of associated costs. The acquirer has to pay higher premium to take control over the target. In the article long-term shareholder wealth performance ...

Solution Summary

The friendly merger evaluations for article reviews are examined.