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Mergers and Acquisitions Deal Initiation and Motivation

Title:

Mergers and Acquisitions Deal Initiation and Motivation

Zhou, Linyi (2016) Mergers and Acquisitions Deal Initiation and Motivation. Masters thesis, Concordia University.

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Abstract

This study examines potential motivations for firms to initiate a merger or acquisition, and investigates the relation between the deal initiator and firm performance, premiums, payment method, and time to completion. Using a sample of U.S. mergers and acquisitions from 2006 – 2012, we find that both target cumulative abnormal returns (CARs) around the announcement date and takeover premiums are significantly lower in target-initiated deals than in bidder-initiated deals (confirming findings of Masulis and Simsir, 2015). Moreover, we find that target-initiated deals utilize more cash as a means of payment (perhaps a byproduct of targets approaching cash-rich bidders), have a shorter time to deal completion, and provide higher long-term buy-and-hold abnormal returns (BHAR) to acquiring firms. Lastly, we show that target firms in target-initiated deals are more financially distressed, providing motivation for such targets to initiate the deal, hurry it along, and accept the lower returns offered.

Divisions:Concordia University > John Molson School of Business > Finance
Item Type:Thesis (Masters)
Authors:Zhou, Linyi
Institution:Concordia University
Degree Name:M. Sc.
Program:Administration (Finance option)
Date:27 January 2016
Thesis Supervisor(s):Davis, Frederick and Walker, Thomas
Keywords:Deal initiation, Mergers and acquisitions, Financial distress
ID Code:980864
Deposited By: LINYI ZHOU
Deposited On:17 Jun 2016 14:37
Last Modified:18 Jan 2018 17:52

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