The Role of Medium of Exchange in Merger Offers: Examination of Terminated Merger Proposals
In this study, we examine the relation between the medium of exchange (cash or stock) and valuation effects associated with terminated merger proposals. We find significantly higher returns for target shareholders after termination of cash offers than after termination of stock offers. This differen...
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| Veröffentlicht in: | Financial management 1994-10, Vol.23 (3), p.51-62 |
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| creator | Sullivan, Michael J. Marlin R. H. Jensen Hudson, Carl D. |
| description | In this study, we examine the relation between the medium of exchange (cash or stock) and valuation effects associated with terminated merger proposals. We find significantly higher returns for target shareholders after termination of cash offers than after termination of stock offers. This difference persists even when a subsequent merger bid does not follow and regardless of the following factors: the party deciding to terminate the offer, the presence of an acquisition program, prior foothold position, relative size of the acquisition, or the presence of competing offers. We conclude that target firm shares are revalued according to private information signaled by the offer medium that pertains to the target firm's stand-alone value or its unique synergy potential. Bidding firm shareholders experience insignificant returns, and these returns are not affected by any of the factors analyzed. |
| doi_str_mv | 10.2307/3665621 |
| format | Article |
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We conclude that target firm shares are revalued according to private information signaled by the offer medium that pertains to the target firm's stand-alone value or its unique synergy potential. Bidding firm shareholders experience insignificant returns, and these returns are not affected by any of the factors analyzed.</description><subject>Acquisitions & mergers</subject><subject>Acquisitions and mergers</subject><subject>Bidding</subject><subject>Bids</subject><subject>Cash</subject><subject>Competition</subject><subject>Corporate synergy</subject><subject>Effects</subject><subject>Finance</subject><subject>Hypotheses</subject><subject>Information economics</subject><subject>Media of exchange</subject><subject>Regression analysis</subject><subject>Shareholders</subject><subject>Stock</subject><subject>Stock offerings</subject><subject>Stock shares</subject><subject>Stockholders</subject><subject>Studies</subject><subject>Target acquisitions</subject><subject>Taxes</subject><subject>Tender offers</subject><subject>Tender offers (Securities)</subject><subject>Terminations</subject><subject>Valuation</subject><issn>0046-3892</issn><issn>1755-053X</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>1994</creationdate><recordtype>article</recordtype><sourceid>HYQOX</sourceid><sourceid>K30</sourceid><sourceid>BENPR</sourceid><recordid>eNp10c1KAzEQAOAgCtYqvoCHRQ9eXM0km2zjrZT6A5WKVBA8LGl20m5pNzXZgr69qW09KTlMZuZj5jCEnAK9ZpzmN1xKIRnskRbkQqRU8Ld90qI0kynvKHZIjkKYUQqMMtki76MpJi9ujomzyROW1Wqx_vU_zVTXE0yqOlb9BH0ytBZ9uI0tvahq3VSuXssR-p8Uyx189m7pgp6HY3JgY8CTbWyT17v-qPeQDob3j73uIDVciiY1GVdqnPPSAOqx4VywUlmlgIpxiTBGbnUupdaWcQMSgUqdaa0ZcsioobxNzjdzl959rDA0xcytfB1XFox2oAO5EhFd_IeAKUEVZJ0sqquNmug5FlVtXeO1mWCNXs9djbaK5S5IwUGxNU__4PGVuKjMX_5y4413IXi0xdJXC-2_CqDF-nrF9npRnm3kLDTO_7Jd-xt4rJMM</recordid><startdate>19941001</startdate><enddate>19941001</enddate><creator>Sullivan, Michael J.</creator><creator>Marlin R. 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H. Jensen</au><au>Hudson, Carl D.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>The Role of Medium of Exchange in Merger Offers: Examination of Terminated Merger Proposals</atitle><jtitle>Financial management</jtitle><date>1994-10-01</date><risdate>1994</risdate><volume>23</volume><issue>3</issue><spage>51</spage><epage>62</epage><pages>51-62</pages><issn>0046-3892</issn><eissn>1755-053X</eissn><abstract>In this study, we examine the relation between the medium of exchange (cash or stock) and valuation effects associated with terminated merger proposals. We find significantly higher returns for target shareholders after termination of cash offers than after termination of stock offers. This difference persists even when a subsequent merger bid does not follow and regardless of the following factors: the party deciding to terminate the offer, the presence of an acquisition program, prior foothold position, relative size of the acquisition, or the presence of competing offers. We conclude that target firm shares are revalued according to private information signaled by the offer medium that pertains to the target firm's stand-alone value or its unique synergy potential. Bidding firm shareholders experience insignificant returns, and these returns are not affected by any of the factors analyzed.</abstract><cop>Albany, N.Y</cop><pub>Financial Management Association</pub><doi>10.2307/3665621</doi><tpages>12</tpages></addata></record> |
| fulltext | fulltext |
| identifier | ISSN: 0046-3892 |
| ispartof | Financial management, 1994-10, Vol.23 (3), p.51-62 |
| issn | 0046-3892 1755-053X |
| language | eng |
| recordid | cdi_proquest_journals_208181795 |
| source | Jstor Complete Legacy; Alma/SFX Local Collection; Periodicals Index Online; EBSCOhost Business Source Complete |
| subjects | Acquisitions & mergers Acquisitions and mergers Bidding Bids Cash Competition Corporate synergy Effects Finance Hypotheses Information economics Media of exchange Regression analysis Shareholders Stock Stock offerings Stock shares Stockholders Studies Target acquisitions Taxes Tender offers Tender offers (Securities) Terminations Valuation |
| title | The Role of Medium of Exchange in Merger Offers: Examination of Terminated Merger Proposals |
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