Failed acquisition offers: The impact of failure reasons on target valuation

Omri Even-Tov, Ben Lourie, Alex Nekrasov and Zeng, Jean (Jieyin)

Finance Research Letters, 2024, vol. 63, issue C

Abstract: Using a large hand-collected sample of 1,246 failed acquisition offers from 1979 to 2016, we examine the effects of failure reasons on the revaluation of target firms. We find a negative revaluation of -16 % for failures not caused by target rejection, suggesting exposure of adverse information about the target's economic conditions. Conversely, targets declining offers show a positive revaluation of +7 %, indicating target management's private information about the firm's superior prospects. These revaluation effects are stronger for hard-to-value targets, consistent with failure reasons revealing more information when there is greater uncertainty about the target's value.

Keywords: Mergers and acquisitions; Failed offers; Target valuation; Failure reasons (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003520

DOI: 10.1016/j.frl.2024.105322

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