Antonio Macias

Using a 2013 Delaware law that reduces the approval threshold from 90% to 50% to conduct a short-form merger after a tender offer, we investigate whether variation in the required level of shareholder support affects acquisition outcomes. We find that lower authorization requirements increase the use of tender offers relative to mergers for Delaware targets. Further, Delaware targets collectively receive greater acquisition premiums and returns after the passage of the new law relative to target firms incorporated other states. We do not find evidence that managers use the lower threshold to extract private benefits. Our results suggest that supermajority shareholder approval is unnecessary for tender offers and can increase the risk of holdup by activist investors.

Material Adverse Change (MAC) clauses play key roles in essentially all merger negotiations. Fewer exclusions in MAC clauses imply broader abandonment options for acquirers. We study the motivations for different scopes of acquirers’ abandonment options. In our comprehensive hand-collected sample, broader firm-specific abandonment options are associated with higher target announcement returns and higher combined acquirer and target announcement gains, lower probabilities of MAC occurrences, and lower conditional completion rates when MACs occur. They are also more prevalent in higher-quality firms with larger information asymmetries. Overall, the results indicate that targets credibly signal their higher values or greater synergies with broader abandonment options for acquirers.

We show that the characteristics of serial acquirers are very different from those studied in prior research. Specifically, we find four major types of acquirers common in the data – loners, occasional acquirers, sprinters, and marathoners. Importantly, these acquirers can be distinguished on an ex ante basis. Marathoners are efficient acquirers that acquire external growth and learn from prior acquisitions. Industry and overvaluation effects matter somewhat for sprinters who acquire targets in short intervals. Path dependency typically does not seem to matter for serial acquirers.

... Joel Houston, Scott Linn, Pete Locke, Steve Mann, Rodolfo Martell, John McConnell, Thomas Moeller, Harold Mulherin, Lalitha Naveen, Micah Officer (AFA ... 1 See Andrade, Mitchell and Stafford (2001), Holmstrom and Kaplan (2001), Moeller, Schlingemann and Stulz (2005). ...

ABSTRACT We find that firms that treat their employees better are less likely to become takeover targets and to be acquired. The shareholders of employee-friendly firms also receive lower premium and smaller share of the surplus created in acquisitions. Employee-friendly implicit contracts and ownership programs are the strongest deterrents of takeovers, while employee-friendly explicit contracts and union relations tend to reduce the target premium the most. Our findings suggest that employees accumulate substantial power within the firm that significantly affects the market for corporate control. The results are not consistent with the idea that equity-holders behave opportunistically and extract value from stakeholders in corporate acquisitions.

ABSTRACT We investigate whether bidders in acquisitions choose the method of payment based on their own misvaluation or the target's misvaluation. The market misvaluation hypothesis suggests that rational managers take advantage of irrational market misvaluations by paying with stock when their stock is overvalued. The winner’s curse hypothesis argues that payment with stock is related to misvaluation of the target. In this paper, we attempt to disentangle the two hypotheses by examining how the method of payment relates to the characteristics of target firms acquired by serial acquirers. Serial acquirers are ubiquitous. Half of all acquirers in our sample are serial acquirers, conducting more than one acquisition in the space of three years - and these serial acquirers conduct the vast majority of acquisitions. Most of the serial acquirers in our sample are serial switchers - that is, they switch method of payment from cash to stock and vice versa in different acquisitions. We show that serial acquirers appear to strategically shift between methods of payment in acquisitions based on changes in their own characteristics. In particular, they attempt to take advantage of their overvalued share values in making stock-financed acquisitions. Target overvaluation does not appear to play a significant role in the acquirer’s choice of payment method, suggesting that avoiding the winner’s curse is at best a secondary consideration for buyers.

ABSTRACT Recent research suggests that target shareholders’ wealth effects from auctions do not differ from their wealth effects in single-bidder negotiations (Boone and Mulherin, 2007b). We find this result puzzling and contend that an analysis of the method of sale decision and the wealth effects outcome must address the self-selection bias resulting from target management’s private information inherent in the decision. Using a self-selection framework, we hypothesize that adverse selection risk (i.e., an anticipated risk) and the uncertainty of future cash flows (i.e., an unknown risk) impact the target’s decision to sell through an auction, as well as the wealth accruing to target shareholders. We find that when target managers initiate the sale of the firm, they are more likely to choose an auction as the method of sale. Our results suggest that the method of sale (i.e., selling the firm through an auction or negotiating with a single bidder) is not random and has a significant impact on the wealth of target shareholders. Specifically, both under a self-selection framework and in deal initiator subsample analysis, we find that adverse selection risk, including a lack of transparency in financial reporting and the uncertainty of future cash flows, impacts the target’s decision to sell through an auction as well as the wealth accrued to target shareholders. Auctions are associated with both higher target cumulative abnormal returns and offer premiums than negotiations, but only if the transaction is not initiated by the target. The target can self-select itself and choose an auction (vs. negotiation) to increase target wealth effects. We also show that controlling for both simultaneity and self-selection biases enriches our understanding of the corporate takeover process.

ABSTRACT We examine the patterns of acquisitions by emerging market firms in emerging and developed markets. We show that emerging market firms are becoming increasingly active in targeting companies in developed countries since 1990. The two dominant patterns of emerging market firm acquisitions are mega deals that involve targets from developed markets and serial acquisitions of relatively small targets in emerging markets. We also detect a sharp increase in the average size of acquisitions by emerging market acquirers. Emerging market acquirers experience significant positive announcement returns when the target is from a developed market.

We document a shift in the structure of acquisition contracts involving bids by private equity firms in the years leading up to the financial crisis. These contracts increasingly relied upon reverse termination fees payable by buyer groups as the only recourse available to targets upon a ...