It Pays to Follow the Leader: Acquiring Targets Picked by Private Equity

This paper examines the impact of financial sponsor competition on corporate buyers. We find that corporate acquirers who purchase targets that financial buyers also bid on outperform corporate acquirers who buy targets bid on by corporate firms only. Deal characteristics, acquirer abilities, and ob...

Full description

Saved in:

Bibliographic Details
Published in:	Journal of financial and quantitative analysis 2012-10, Vol.47 (5), p.901-931
Main Authors:	Dittmar, Amy, Li, Di, Nain, Amrita
Format:	Article
Language:	eng
Subjects:	Acquisitions & mergers Bidding Business structures Cash Corporate acquisitions Economic competition Equity Financial economics Market competition Market value Private equity Quantitative analysis Target company
Online Access:	Get full text
Tags:	Add Tag No Tags, Be the first to tag this record!

Description
Summary:	This paper examines the impact of financial sponsor competition on corporate buyers. We find that corporate acquirers who purchase targets that financial buyers also bid on outperform corporate acquirers who buy targets bid on by corporate firms only. Deal characteristics, acquirer abilities, and observable target characteristics cannot explain this difference in returns. Corporate acquirers have higher returns when they follow a first bid by a financial buyer rather than a first bid by another corporate buyer. The results suggest that financial bidders identify targets with high potential for value improvement and winning corporate bidders are competent in exploiting this potential.
ISSN:	0022-1090 1756-6916