The Success of Acquisitions: Evidence From Disvestitures / Steven Kaplan, Michael S. Weisbach.

Format:

Book

Author/Creator:

Kaplan, Steven.

Contributor:

National Bureau of Economic Research.

Weisbach, Michael S.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3484.

NBER working paper series no. w3484

Language:

English

Subjects (All):

Acquisitions (Libraries).

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Success of Acquisitions

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1990.

Cambridge, Mass. : National Bureau of Economic Research, 1990.

Summary:

This paper studies a sample of large acquisitions completed between 1971 arid 1982. By the end of 1989, acquirers have divested almost 44% of the target companies. Using the accounting gain or loss recognized by the acquirer, press reports, and the sale price, we characterize the ex post success of the divested acquisitions and consider only 34% to 50% of classified divestitures as unsuccessful. Acquirer returns and total (acquirer arid target) returns at the acquisition announcement are significantly lower for unsuccessful acquisitions than for divestitures not classified as unsuccessful arid for acquisitions not divested. These results suggest that market reactions to acquisition announcements reflect expectations of future profits and that unprofitable acquisitions are recognized as such when initiated. Diversifying acquisitions are almost four times more likely to be divested than related acquisitions. However, we do not find strong evidence that diversifying acquisitions were less successful than related ones.

Notes:

Print version record

October 1990.

Includes bibliographical references.