Deal size,acquisition premia and shareholder gains |
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| Affiliation: | 1. ICMA Centre, Henley Business School, Reading University, United Kingdom;2. School of Business, University of Mississippi, USA;3. ALBA Graduate Business School, Greece;1. Mays Business School, Texas A&M University, College Station, TX 77843, United States;2. Henry B. Tippie College of Business, University of Iowa, Iowa City, IA 52242, United States;3. Peter T. Paul College of Business and Economics, University of New Hampshire, Durham, NH 03824, United States;1. Australian School of Business, UNSW, Sydney, NSW 2052, Australia;2. DCU Business School, Dublin City University, Glasnevin, Dublin 9, Ireland |
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| Abstract: | This study examines the contradictory predictions regarding the association between the premium paid in acquisitions and deal size. We document a robust negative relation between offer premia and target size, indicating that acquirers tend to pay less for large firms, not more. We also find that the overpayment potential is lower in acquisitions of large targets. Yet, they still destroy more value for acquirers around deal announcements, implying that target size may proxy, among others, for the unobserved complexity inherent in large deals. We provide evidence in favor of this interpretation. |
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