What Do Returns to Acquiring Firms Tell Us? Evidence from Firms That Make Many Acquisitions

TLDR

Variation in returns reflects target characteristics and bid methods rather than bidder identity. The study examines shareholder returns for firms that acquire five or more public, private, or subsidiary targets within a short period. The authors analyze the shareholder returns of these multi‑acquisition firms to assess the impact of target type and payment method. Bidder shareholders gain when acquiring private firms or subsidiaries, lose on public firms, and achieve larger returns for bigger targets and stock offers, consistent with liquidity discounts and tax/control effects.

Abstract

ABSTRACT We study shareholder returns for firms that acquired five or more public, private, and/or subsidiary targets within a short time period. Since the same bidder chooses different types of targets and methods of payment, any variation in returns must be due to the characteristics of the target and the bid. Results indicate bidder shareholders gain when buying a private firm or subsidiary but lose when purchasing a public firm. Further, the return is greater the larger the target and if the bidder offers stock. These results are consistent with a liquidity discount, and tax and control effects in this market.