Bidder Discounts and Target Premia in Takeovers

Boyan Jovanovic () and Serguey Braguinsky ()

No 9009, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: When a takeover is announced, the sum of the stock-market values of the firms involved often falls, and the value of the acquirer almost always does. Does this mean that takeovers do not raise the values of the firms involved? Not necessarily. We set up a model in which the equilibrium number of takeovers is constrained efficient. Yet, upon news of a takeover, a target's price rises, the bidder's price falls, and, most of the time the joint value of the target and acquirer also falls.

JEL-codes: G3 (search for similar items in EconPapers)
Date: 2002-06
Note: AP CF
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Journal Article: Bidder Discounts and Target Premia in Takeovers (2004)
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