We test the implications of the Misvaluation hypothesis (Shleifer and Vishny, 2003) for a large sample of acquirers of private and public target firms. Consistent with the Misvaluation hypothesis we find that acquirers are overvalued. The overvaluation is higher for stock acquisitions of private targets. We find that the announcement period returns are lower for firms that are overvalued at the time of acquisition. Announcement period returns are lower for larger acquisitions of public targets and higher for larger acquisitions of private targets. We also examine the factors that determine stock as the method of payment. Consistent with the Misvaluation hypothesis we find that firms that have higher valuation measures at the time of acquisition tend to use stock.  Acquirers of public targets tend to use stock more frequently.