Location,Proximity, and M&A Transactions

In this paper, we examine how the geographic location of firms affects acquisition decisions and value creation for acquirers in takeover transactions. We find that firms located in an urban area are more likely to receive a takeover bid and complete a takeover transaction as a target than firms located in rural areas, and takeover deals involving an urban target are associated with higher acquirer announcement returns, after controlling for the proximity between the target and the acquirer. In addition, a target's urban location significantly attenuates the negative effect of a long distance between the target and the acquirer on acquirer returns, a fact that is documented in the existing literature. Our findings reveal a previously underexplored force—firm location—that can affect takeover transactions, in addition to proximity. Our paper suggests that a firm's location plays an important role in facilitating the dissemination of soft information and enhancing information‐based synergies.     

Joint venture evolution: extending the real options approach

Real options theory has emerged as a promising avenue to study joint venture (JV) evolution as a strategic response to managing uncertainty. We extend the real options approach by integrating it with game theory. Such a combined method enriches the valuation functions of each partnering firm and helps to identify the optimal decisions for exercising options in a JV. In our model, each firm's synergy from the joint operation and its knowledge acquisition capability (KAC) can significantly influence the competitive dynamics between partners, potentially affecting how each firm decides to acquire, divest, or dissolve. We employ a new solution technique in real options theory to capture the stochastic process of three factors, and use computer simulation to test the model under varying conditions. The results are stated in five testable propositions, providing a better understanding of the dynamics of a JV. We find that symmetries between partners in synergy or KAC contribute to stability or dissolution of the JV, whereas asymmetries in synergy or KAC make acquisition of the JV assets by one partner desirable. Copyright © 2008 John Wiley & Sons, Ltd.     

Financial constraints and synergy gains from mergers and acquisitions

This paper examines mergers and acquisitions motivated by financial constraints. Synergy gain is measured as the cumulative abnormal return of a value‐weighted portfolio of the acquirer and the target around the acquisition announcement. By constructing a financial constraint difference between the target and the acquirer, we find a positive relationship between the financial constraint difference and synergy gains generated from the acquisition. The positive effect of the financial constraint difference is only significant for high growth targets and severely constrained targets. The acquirer's corporate governance also enhances the synergy gains created from the financial constraint difference. Additional evidence shows that both acquirer's and target's shareholders benefit from the financial constraint difference. Our results are robust for different measures of financial constraint.     

Untangling the Integration–Performance Link: Levels of Integration and Functional Integration Strategies in Post-Acquisition Integration

The integration–performance link created during post-acquisition integration has defied satisfactory theoretical explanation. To address this gap, we conduct a functional analysis to explore the intermediating mechanisms between the level of integration – which represents the extent of the target firm’s integration with the acquirer – and acquisition performance. We use six in-depth acquisition case studies in the medical technology industry to develop an integrated model with which to untangle the integration–performance link. First, our model connects the level of integration to specific functional integration strategies, which refer to the approaches acquirers employ to manage functional resources. Second, we identify value creation and value leakage as the two routes through which functional integration strategies impact acquisition performance. Finally, we propose two qualitative measures of acquisition performance: value gap and time delay. Our study suggests that a functional analysis of the integration–performance link may help resolve long-standing conflicts within the literature.     

R&D investment as a signal in corporate takeovers

The purpose of this paper is to analyze the effects that takeover threats have on firms' preacquisition R&D intensity. Critics of takeovers usually argue that takeover threats may reduce target firms' R&D investments. However, I find that target firms may increase R&D investment in order to signal their compatibility with the acquiring firm. The identity of the acquired firm depends on the market size and target firms' efficiency and compatibility. Through R&D investments, target firms may affect this result, signaling potential outsiders the kind of competition they may face, and forcing them to accept lower takeover offers. Copyright © 2009 John Wiley & Sons, Ltd.     

Can preemptive bidding in takeover auctions be socially optimal? Yes it can

This paper analyzes a model of preemptive jump bidding in private value takeover auctions with entry costs. It shows that when the second bidder owns a fraction of the target firm preemptive jump bidding leads to a higher social surplus, improves the expected profit of both bidders and reduces the expected final price. Such a toehold also leads to higher jump bids. The model implies that preemptive bidding hurts the minority shareholders but benefits the large shareholder of the target firm.     

The effect of mergers and acquisitions on environmental,social and governance performance and market value: Evidence from EU acquirers

This study explores the effect of environmental, social, and governance (ESG) performance on market value and performance in the context of mergers and acquisitions. We examine whether acquisition of targets with better ESG performance can help acquirers to increase their own ESG performance and whether the market values the increased ESG performance positively. Moreover, we explore whether the acquisition of targets with better ESG performance affects the market value of acquirers. For this study, we utilize a sample of 100 European mergers and acquisitions between 2003 and 2017, for which matching data on the ESG performance of both the target and acquiring firms are available. Our results show that the postmerger ESG performance of the acquirer increases following the acquisition of a target that has higher ESG performance than that of the acquirer in the premerger stage, whereas the postmerger market value of the acquirer increases following an increase in the acquirer's postmerger ESG performance in relation to its premerger ESG performance. Finally, we provide partial evidence of a positive relationship between the postmerger market value of the acquirer and the acquisition of a target with higher ESG performance than itself in the premerger stage.     

Real options game analysis of sleeping patents

Using the real options game approach, we analyze the two-stage preemptive patent-investment race between an incumbent and a challenger (new entrant) in a product market with profit flow uncertainty. The challenger can gain entry into the monopolized product market dominated by the incumbent by patenting related technologies for a substitute product. To maintain its monopolized advantage, the incumbent has an incentive to block challenger’s entry by patenting the substitute product before the challenger. Either firm can pay an upfront fee to gain an immediate acquisition of the patent and subsequently holding the real option to develop the new substitute product. Under our simplified real options game model, there is no potential patent litgation risk. Also, the costs of holding the patent, like the payment of annual fees, are taken to be zero. We provide a full characterization of the optimal strategies adopted by the incumbent and challenger firm in this asymmetric patent-investment race. In particular, we examine the phenomena of sleeping patent, where the patented product is not launched immediately into the product market.     

Corporate takeovers,bargaining and managers' incentives to invest

This paper analyzes the impact of potential takeovers on the investment decisions of managers. The takeover involves bargaining over the potential surplus between the acquiring firm, the target manager, and shareholders of the target firm. The anticipation of future takeover gains will influence the decision‐makers to invest ex ante. Interestingly, both over and underinvestment might prevail, depending on the relative bargaining powers of the parties. The model encompasses specific cases documented in the empirical literature and mergers and acquisitions (M&A) practice. It is, therefore, particularly suited to focus on the desirability of anti‐takeover legislation. Copyright © 2000 John Wiley & Sons, Ltd.     

共享审计可以提高并购绩效吗？——来自中国A股上市公司的经验证据

以2004—2016年我国A股上市公司的并购事件为样本，研究并购双方共享审计师对并购绩效的影响，并考察了信息不对称程度对两者之间关系的调节作用。结果表明并购双方共享审计师能显著提高并购方及目标方的并购绩效；对于信息不对称程度更大的跨行业、跨地域并购事件，共享审计对并购绩效的正向影响更为显著。进一步检验发现共享审计可以显著降低并购双方之间的信息不对称程度，进而导致较低的并购溢价。     

Value Added and Corporate Control in the U.S.

This paper examines the ability of value added to assess the differences between target firms and their industries and to explain target firms' abnormal returns during the takeover period. In a sample of 234 completed takeovers over the period 1977 to 1989, takeover targets have lower value added to total assets ratios than other firms in their industries in the year preceding the year in which the takeover is completed. Target firm abnormal returns observed during the takeover period are positively related to the difference between target Firm and average industry value added to total assets. This suggests that while acquired firms are on average underperformers, acquiring firms value the access to, and possibly the ability to redistribute, the resources of target firms.     

Valuing technological synergies in mergers

Technological synergy in mergers and acquisitions (M&As) is achieved when there is an increase in value generated by combining the stock of complementary technologies of acquirers and targets, as well as utilizing target’s patents to initiate or defend lawsuits against competitors. Using U.S. patent data, we provide quantitative measures of these two sources of technological synergy. We find that these measures of technological synergy are important considerations of acquiring firms and capital market in valuing target firms’ innovative assets, as the measures are positive determinants of merger premium and total synergy gain. The expected total gains of acquirers’ and targets’ shareholders from technological synergy decrease with the difficulties of post-merger integration as proxied by geographical distance between acquirer and target. Our technological synergy measures are also good predictors of post-merger realized synergy, i.e., increase in patent outputs in the overlapped technology classes and market share.     

Market anticipation of merger activities: An empirical test

This paper empirically examines the possibility that there is leakage of information regarding a merger prior to the announcement of the first bid for the target firm. The tests for the existence of market anticipation are based on the behavior of variances implied in the premia of call options listed on the target firms' stocks. We conclude that the evidence is consistent with the hypothesis that the market anticipates an acquisition prior to the first announcement.     

To The Raider Goes The Surplus? A Reexaminationof the Free-Rider Problem

This paper reexamines Grossman and Hart's (1980) insight into how the free-rider problem excludes an external raider from capturing the increase in value it brings to R firm The inability of the raider to capture any of the surplus depends critically on the assumption of equal and indivisible shareholdings–the one-share-per-shareholder model In contrast, we show that once shareholdings are large and potentially unequal, a raider may capture a significant part of the increase in value Specifically, the free-rider problem does not prevent the takeover process when shareholdings are divisible.     

Premium,merger fees and the choice of investment banks: A simultaneous analysis

We analyze 635 US M&A transactions from 1985 to 2004. In contrast with prior research, we distinguish between the target and acquirer fees, and examine their independent effects on the level of the merger premium. The study provides evidence of a positive (negative) association between target (acquirer) fees and the level of the premium. It indicates that the reputation of investment banks affects the level of merger fees, but does not affect the level of the premium. The findings confirm the conflict of interests between target and acquirer firms where the investment banks’ efforts are positively related to shareholders’ interest. The study also finds that when acquirers pay higher fees than target firms, they pay lower premiums. The findings also imply that for the small proportion of mergers (13%) resulting in relatively large value gains for buying firms, an acquirer might be willing to pay large advisory fees even though this may result in a higher premium.     

Integration risk in cross-border M&A based on internal and external resource: empirical evidence from China

This paper concerns the high failure rate during the integration phase of cross-border M&A from the resource-based view. This integration risk in cross-border M&A comes from both firm’s internal resource and external resource integration. On this basis, we clearly analyze the relationship between resource similarity and firm’s internal resources integration risk, as well as resource complementarity and firm’s external resource integration risk. Then, we put forward the main conclusion: stronger external resource complementarity and stronger internal resource similarity between the acquirer and target firms will make integration in cross-border M&A less risky. For this study’s empirical stage, we collect a large amount of questionnaire data from Chinese firms with cross-border M&A experiences. We use the logistic regression method to verify hypothesis. This paper provides both the acquirer and target firms with fresh ideas of how to avoid the integration risk of cross-border M&A. We hope to help firms from developing country to achieve more outstanding results through cross-border M&A in an intense global competitive environment.     

Short-selling restrictions,takeovers and the wealth of long-run shareholders

In this paper we consider a situation in which a firm may be able to influence the investors’ ability to short-sell its stock. We analyze the effect short-selling restrictions have on the market price and the subsequent effect generated on the market for corporate control. More precisely, we argue that short-selling restrictions may lead to exclusion of pessimistic beliefs and may therefore inflate prices. Thus, if a company is poorly managed and has a stock with strong short-selling restrictions, a profitable takeover will not emerge because of the high stock price. The raider may not have the incentives to acquire the company as its price will be above its fundamental value, conditional on takeover, even accounting for the potential benefits of takeover. We then argue that such effects are detrimental to long-run shareholders and that a value-maximizing strategy is to have a stock with no short-selling restrictions.     

The long-term success of M&;A in the automotive supply industry: determinants of capital market performance

In the recent past, the automotive supply industry has been facing increasing merger activity. This paper examines the short- and long-term wealth effects of horizontal mergers and acquisitions on acquirers in the automotive supply industry. Based on a sample of 230 takeover announcements between 1981 and 2007, significant positive announcement returns to acquiring companies were determined. While these positive short-term returns to acquirers represent an outstanding attribute of this industry in terms of perceived synergy potential, this study also finds that acquirers are unable to sustain this exceptional position beyond a short-term horizon. A combination of the Fama-French-3-Factor model in calendar time and the control firm approach in event time consistently reveals significant value destruction of about 20% over 3years. In addition, the study determines a significant impact of internationalization, transaction volume, product diversification, and acquirer’s bidding experience on the long-term post-acquisition performance.     

Preemptive bidding in common value takeover auctions: Social surplus and the target’s revenue

This paper develops a model of preemptive jump bidding in common value takeover auctions. It shows that, in a case of common values, jump bidding increases the social surplus and, under certain conditions, can lead to a higher expected target’s revenue. It also demonstrates that an increase in investigation costs may improve social efficiency even if it leads to larger direct social costs. Based on the results, the paper provides several implications related to legal fees and the length of the takeover contest.     

目标公司股权结构对敌意收购的影响——中信证券收购广发证券的案例研究

兼并、收购、接管(敌意收购)和买断,是公司控制权市场常见的几种表现形式。本文通过中信证券收购广发证券的案例研究,从敌意收购的过程、动因、反收购措施及市场反应的角度对其进行了分析,并指出目标公司的股权集中度、交叉持股、非上市公司特征等股权结构方面对敌意收购的影响。