When do acquirers earn abnormal returns?
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Capron, L., & Pistre, N. (2002). When do acquirers earn abnormal returns? Strategic Management Journal, 23(9), 781-794.
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WHEN DO ACQUIRERS EARN ABNORMAL RETURNS?
There have been many studies which have shown that acquisitions are mixed blessings for the shareholders of acquiring firm. Empirical evidence suggests that average returns to successful bidders are null, while the synergistic benefits of acquisitions usually accrue to the shareholders. This asymmetric distribution of gains between acquirer and target remains a puzzle in literature. The research examined conditions under which acquirers earn abnormal returns. According to Barney and Chatterjee mergers create value when competitors cannot duplicate synergy and resulting cash flows. When target has source of synergies the market would allocate full gains to the target because of competition between potential acquirers. In the research on restructuring-driven vs. synergistic takeovers, Chatterjee argues that restructuring-driven takeovers is common in firms that have management capabilities to restructure the target and bid for it. Hence source of value lies with the target. As a result price is bid for target until abnormal returns are competed away from successful bidder. In case of synergistic takeovers, synergies are divided between acquirer and target. The distribution of gains between acquirer and target depends on their resource contribution. Hence, there are three resource contribution scenarios which are possible:
Model 1: ...
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