Industry asset revaluations around public and private acquisitions

Francois Derrien (), Laurent Frésard, Victoria Slabik and Philip Valta

Journal of Financial Economics, 2023, vol. 147, issue 1, 243-269

Abstract: Revaluations of industry peers around horizontal acquisitions are negative when targets are private, but positive when they are public. We posit this “revaluation spread” arises because acquiring managers favor private targets when public firms are overvalued. Targets’ ownership status thus conveys information about industry assets’ misvaluation and triggers predictable revaluations. Supporting this idea, private acquisitions occur when private targets appear “cheaper” than public firms based on valuation multiples or the trading activity of industry insiders. The revaluation spread varies with overall market misvaluation, predicts future industry returns, and is unrelated to peers’ and industries’ fundamentals.

Keywords: Merger & acquisitions; Information; Revaluation; Stock returns; Peers; Misvaluation (search for similar items in EconPapers)
JEL-codes: G14 G34 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:147:y:2023:i:1:p:243-269

DOI: 10.1016/j.jfineco.2021.10.003

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