Abstract

We examine the drivers of bidding success in multiple-bidder merger and acquisition (M&A) announcements. We employ a series of logistic regression analyses and find that higher company value, greater profitability, a friendly offer attitude and a compatibility in industry specialization between bidders and targets serve as powerful determinants of the success of a given M&A attempt when multiple bidders are present. Our findings also suggest that if a small bidder (relative to its target) wants to be the final winner among the multiple bidders, the company’s growth opportunities are valued most by the target company’s shareholders. A second research is conducted to estimate a series of cross-sectional regression models to explore the determinants of target and bidder announcement returns respectively. Our findings suggest that the market already knows around the time of the bidding which bidder will be successful (unsuccessful). The stocks of successful bidders display the typical price increase on the announcement date that is contrary to the results documented in the literature whereas the abnormal returns of unsuccessful bidders fluctuate dramatically during the same period, which can be discerned clearly from the successful bidders.