Sky Blog
What remedy should a target be entitled to get from a breaching buyer in a merger transaction? This seemingly straightforward question has surprisingly vexed M&A practitioners and judges over the years.
With a public target, the buyer typically promises to …
The well-developed theory of the winner’s curse can potentially explain the poor performance of mergers and acquisitions (Roll, 1986). A key reason for the curse is the uncertainty concerning a deal’s value (e.g., Capen, Clapp, and Campbell, 1971; Bazerman and …
Rumors are common in financial markets and often relate to mergers and acquisitions (M&A). While the majority of M&A rumors originate from speculation or opinion pieces (Jia et al., 2020) and never turn into deal announcements, academic research finds that …
Managerial entrenchment is detrimental to shareholder value (Faleye (2007), Cohen and Wang (2013), and Cohen and Wang (2017)). Managers are able to become entrenched by making specific investments whose value is higher under their watch than under that of the …
Contrary to common belief, M&A transactions are not overwhelmingly initiated by acquirers. Target managers frequently put their firms up for sale before receiving any unsolicited bids. In fact, in our sample of U.S. domestic M&A deals completed between 1997 and …
A fundamental question in corporate finance is how mergers and acquisitions create value. Possibilities include generating economies of scale or scope, increasing managerial efficiency, improving production techniques, or strengthening market power. Synergies are a leading motive for doing mergers, but …
Prior research has documented the existence of disclosure externalities, or information spillovers, between firms in a number of different settings. The idea is that when two firms are economically related, public disclosures by one firm can affect the stock price …
In mergers and acquisitions (M&A), one of the trickiest tasks is assessing the value of the company to be purchased or sold. While in some cases buyers and sellers come easily to an agreement, in others the information asymmetry between …
In a new paper, “Worthless Companies,” I explain how companies with worthless assets can have substantial equity value on efficient markets and debt that trades near par, so long as an irrational bidder may acquire the company.
Consider a firm …
In late May, Target Corporation (“Target”) reached an $18.5 million settlement with the Attorneys General (“AGs”) of 47 states and the District of Columbia, resolving the AGs’ investigation into Target’s 2013 data security breach. Target, like other victims of cyber …
Of the nearly 6,000 U.S. firms that conducted initial public offerings between 1980 and 2008, 38 percent became merger bidders within three years after the IPO and 12 percent became takeover targets. It is important that investors understand these developments, …
