An analysis of foreign takeovers in the United States

Using a sample of 96 US companies taken over by foreign companies during the period 1975-87, we assess foreign takeovers in two stages: pre-takeover and takeover. We find evidence that foreign firms target US firms whose operations are related to their own operations and that have low market-to-book ratios, suggesting foreign bidders acquire firms that provide a greater opportunity for market entry and synergistic gains. The synergistic gains appear to result from the foreign buyer using its own intangible assets (e.g. managerial skills) to improve the target. We also find that foreign takeover activity is aimed primarily at US industries that themselves make high levels of foreign direct investments, implying that the bidders use takeovers as a quick way to counteract rival firms' moves. We find evidence that foreign takeovers take place in relatively mature, low-growth industries and that foreign targets are, on average, smaller than the non-targets. The wealth effect on the announcement of a takeover is significantly higher for foreign takeovers than for takeovers by domestic firms. Also, we find that foreign bidders pay a slightly higher premium for targets whose operations are related to their own.     

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.     

MERGERS AND PROFITABILITY: A MANAGERIAL SUCCESS STORY?*

Since 1983 expenditure on acquisitions in the UK has more than doubled in real terms, despite the fact that the consensus of opinion in the academic literature is that acquisitions are not, on average, performance enhancing for the acquiring firm. Such literature, however, relates mainly to the acquisition of large, public companies. Drawing on survey evidence from 146 of the UK's top 500 companies, this article reports the results from a survey which encompasses all takeovers. The study revealed that is the expected reward of increased profitabililty which is used in ex-post evaluation. The major finding of the study is, however, that managers firmly perceive that their takeover activity has been performance enhancing for their company. The evidence presented does suggest that the integration of small acquisitions into an existing organizational structure may be achieved without severe problems of loss of control, and the subsequent decline in performance which beset large acquisitions     

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.     

Do institutional shareholders police management?

Some have argued that legislation limits the ability of institutional shareholders to discipline shirking management teams. However the level of takeover activity in the 1980s suggests that the cost of using takeovers to discipline management has decreased. This may give institutional shareholders the ability to participate actively in corporate governance. This paper presents an empirical examination that is consistent with this hypothesis. First, institutional ownership concentration varies across firms according to the benefits of policing firms in 1988. The relationship is less pronounced in 1980. Second, firms characterized by concentrated institutional ownership are more likely to use takeovers as the disciplinary mechanism. © 1997 John Wiley & Sons, Ltd.     

Disciplinary Takeovers and Industry Effects

This paper presents a disciplinary explanation for some seemingly paradoxical stylized facts from the takeover literature. Most notable among these are: (1) hostile takeovers are predicted better by industry-wide than by firm-specific performance failures; and (2) gains from a successful bid for a specific firm extend to other firms in the same industry. Our explanation is based on the idea that managerial incentives based on relative performance evaluation may induce an inefficient industry-wide equilibrium in which all firms underperform with respect to a value-maximizing firm, but no firm underperforms with respect to the industry average. A takeover can serve as a means to destroy such an inefficient industry-wide incentive equilibrium.     

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。     

Corporate Control Through Board Dismissals and Takeovers

This paper examines some policy issues related to the interaction between internal and external corporate control mechanisms—board dismissals and takeovers—by focusing on the information aggregation and other effects related to this interaction. We model the functioning of corporate control mechanisms as an example of a multilayered principal-agent relationship in which shareholders delegate the task of monitoring management quality to the board and rely on the external takeover market to provide additional disciplining of the manager as well as of the board. This gives rise to two effects: (1) a substitution effect, whereby the takeover market partially substitutes for board dismissal of the manager, leading to greater lenience toward the manager by a board acting in the shareholders' best interest, and (2) a kick-in-the-pants effect, whereby the board is stricter with the manager because it may be dismissed by a successful acquirer who views it as lax. The interaction of these two effects leads to various implications about the behavior of boards and potential acquirers. In particular, a well-functioning internal control mechanism (the board) does not obviate the need for external control (takeovers). Moreover, somewhat counterintuitively, there may be a greater incidence of takeovers when the internal control mechanism is working well than when it is not.     

Management turnover and executive compensation in synergistic takeovers

The purpose of this paper is to provide a model of management turnover and executive compensation for a synergistic takeover. I extend a principal-agent model to include a synergy factor. I argue that the choice of management structure—turnover or no-turnover—provides an opportunity for the shareholder to efficiently utilize three elements of the incentive contracts: effort, insurance (risk-reduction) and synergy.I explain high turnover rates after takeovers, especially in conglomerate mergers as compared to horizontal mergers. Also, my model is consistent with empirical evidence that there is a high rate of management turnover in friendly as well as hostile takeovers and thus complements the model of the disciplinary role of takeovers. I also discuss an optimal compensation structure in synergistic takeovers compatible with their corresponding organizational forms.     

Managerial Incentives for Takeovers

The paper studies managerial incentives in a model where managers choose product market strategies and make takeover decisions. The equilibrium contract includes an incentive to increase the firm's sales, under either quantity or price Competition. This result contrasts with previous findings in the literature, and hinges on the fact that when managers are more aggressive, rival firms earn lower profits and thus are willing to sell out at a lower price. However, as a side effect of such a contract, the manager might undertake unprofitable takeovers.     

Re-connecting capitalism: prospects for the regulatory reform of the employee interest in UK takeovers

This article draws upon the disconnected capitalism thesis (DCT) to analyse UK takeovers and their implications for workers. The DCT refers to the disconnect between the source of value creation (the labour process) and the wider political economy. Specifically, we highlight a particular aspect of this disconnect whereby those who create value and have a long-term stake in firms (employees and managers at the firm level) are disconnected from decisions regarding takeovers, as a consequence of wider economic and political trends (processes of financialisation/marketisation and associated state support for a neoliberal takeover regime). We outline these trends and argue the case for a re-connect, which will require empowering employees and managers to have more influence in takeover decisions and, in turn, disempowering shareholders and financial intermediaries. The article thus highlights the regulatory space for takeovers and considers feasible policy options, a set of interlinked regulatory changes, which will in particular require a more assertive state.     

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.     

Defensive acquisitions in the banking industry: The takeover premium hypothesis

We define defensive acquisitions as takeovers made by a firm so as to become so large that it becomes an unattractive target itself. A sample of defensive acquisitions in the banking industry is used to test the takeover premium hypothesis. Under this hypothesis, the defensive acquirers lose because a takeover premium that previously existed in their prices is deflated while the takeover premium increases for smaller competitors because they become more likely targets. We find that the defensive acquirers experience significant negative abnormal returns on the announcement day, and that smaller competitors have positive abnormal returns on the announcements of defensive acquisitions. In contrast, larger competitors do not react to the announcements. The results are consistent with the takeover premium hypothesis.     

Corporate takeovers,stockholder returns and executive rewards

Various motives for making corporate acquisitions have been forwarded in the managerial economics literature. Two that have received a lot of attention are the maximization of stockholder wealth and the maximization of senior management's utility. These two alternative views can lead to different acquisition decisions. The paper examines the returns to senior management and the returns to stockholders following corporate takeovers in the United Kingdom. The evidence suggests that if shareholders profit from takeovers then so do the senior' management. Of more interest, however, is the finding that if acquisitions result in a reduction in stock market value for the acquiring firm, their senior management appear to gain. In particular, senior management remuneration increases substantially after an acquisition. This evidence is consistent with the maximization of senior management's utility being an important motive in many corporate-acquisition decisions.     

The role of executives in hostile takeover attempts

This paper proposes a two-stage game theoretic model where the discretionary power of executives acts as an implicit defense against hostile takeovers. Following managerial enterprise models, this paper analyzes the effects of discretionary power of target’s executives over R&D and advertising expenditures in defeating hostile takeover attempts. It is shown that in vertically differentiated industries, in equilibrium, target’s executives keep low level of R&D and advertising expenditures to make their firm an unattractive target for hostile takeovers. The model reveals that executives are influenced by their self-interest of monetary and non-monetary benefits and this self-interest makes the industry more differentiated.     

The Economic Effects of Anti-takeover Gimmicks; An American View

Should companies be allowed to protect themselves from takeover? Robert McGee, of Seton Hall University, outlines the case against ‘poison pills’ and other restrictions on takeovers and mergers.     

The impact of anti‐takeover charter amendments on expectations of future earnings and takeover activity

In this study, additional evidence of the impact of anti‐takeover amendments on firm earnings and subsequent takeover activity is presented. It is found that analysts’ projections of financial performance measures do not appear to be altered by the adoption of anti‐takeover amendments. Additionally, it is found that the anti‐takeover charter amendments do not impact either takeover activity or takeover premiums following their adoption. Thus, anti‐takeover amendments appear to have few, if any, consequences to shareholders. Copyright © 1999 John Wiley & Sons, Ltd.     

Looking for God,meaning, physical fitness and beyond: the religious and spiritual space in sport entrepreneurship

Over the past several years, both academic literature and the popular press have heralded a renewed interest in religion and spirituality in both entrepreneurship and sport disciplines. The search for God, meaning, and other expressions of religiosity and spirituality tends to appear embedded in a wider variety of cultural forms in the Western world, including enterprise and sport cultures. Notwithstanding the increasing awareness of the mutual impacts of religion and spirituality in the entrepreneurship and sports academic fields, attention to these topics is lacking within the sport entrepreneurship literature. In this conceptual paper, sport entrepreneurship is re-thought from its religious and spiritual dimensions, paying special attention to the fitness sector, specifically to activities related to so-called “slow fitness”. Utilizing existential philosophy from Paul Ricoeur as our theoretical framework, we reflect on this part of the fitness industry to understand the religious and spiritual space in sport entrepreneurship. In this sense, the paper provides other elements to introduce into discussions of what defines this emergent academic area.

     

Agile for HR: Fine in practice,but will it work in theory?

Agile HR is a topic of growing interest among HR professionals, reflecting pressures for greater organisational agility in response to environmental uncertainty. However, agile HR has received virtually no attention in the academic HR literature, typifying a divergence between the interests of HR practitioners and strategic HRM research, something which has been a recurring concern in recent reviews of SHRM literature. In this paper we offer a definition of agile HR as a HR operational strategy and assess how the relationship between organisational strategy, HR strategy and HR operational strategy has evolved over four waves since the 1950s. Our analysis highlights the neglect of HR operating models in SHRM research, and we propose a research agenda incorporating agile as a HR operational strategy in models of SHRM. We propose that this has the potential to mitigate some of the limitations highlighted in recent reviews of this literature.     

The effect of takeover defenses on the dividend decision

Many firms have sought protection from hostile takeovers by passing defensive amendments to their corporate charter and/or lobbying their state legislatures for statutory protection. Agency theory would suggest that any such takeover defenses alter the principal-agent relationship. A consequence of such a change may be a change in corporate decision making. The objective of this research is to test the effect that passage of antitakeover amendments has on a firm's dividend policy. We use six alternate measures of dividend activity: total dividends paid, dividends per share and dividends relative to earnings, cash flow, market value, and book value. Our results indicate that firms that adopt antitakeover amendments, when compared to an industry control sample, tend to have a slower rate of growth in dividend payout as measured by the proxy variables. These results suggest that entrenchment is not a likely outcome of such amendments.