Does takeover competition affect acquisition choices and bidding firm performance? Australian evidence

Article

Faff, Robert, Gunasekarage, Abeyratna and Shams, Syed. 2020. "Does takeover competition affect acquisition choices and bidding firm performance? Australian evidence." Accounting and Finance. 60 (4), pp. 3581-3619. https://doi.org/10.1111/acfi.12527
Article Title

Does takeover competition affect acquisition choices and bidding firm performance? Australian evidence

ERA Journal ID19059
Article CategoryArticle
AuthorsFaff, Robert (Author), Gunasekarage, Abeyratna (Author) and Shams, Syed (Author)
Journal TitleAccounting and Finance
Journal Citation60 (4), pp. 3581-3619
Number of Pages39
Year2020
PublisherJohn Wiley & Sons
Place of PublicationUnited Kingdom
ISSN0810-5391
1467-629X
Digital Object Identifier (DOI)https://doi.org/10.1111/acfi.12527
Web Address (URL)https://onlinelibrary.wiley.com/doi/full/10.1111/acfi.12527?casa_token=Zno0ScYYJIkAAAAA%3ApXhoKLwBV19xsneoFxWrawEc6TDml_nHrGn_vpL3TOv4xQDiCm0TvSM-RMdG7z8D2zRo0GWDfphfxfA
Abstract

We examine the influence of takeover competition on three acquisition choices: (i) public versus private target acquisitions; (ii) stock versus cash financed acquisitions; and (iii) related versus unrelated acquisitions. We find strong evidence of acquirers’ preference for public targets, stock swaps and business focus, in the face of takeover competition. Further, we find that the takeover competition has a positive influence on the bid premium paid to acquirer public targets and those financed with stock issues; competitive bids offered to acquire related targets are associated with significantly low bid premiums. In the short‐term announcement window, competition‐induced bids to acquire public targets and those financed with stock are penalised by the capital market. However, only stock‐financed takeovers undertaken in a competitive takeover market show a long‐run decline in performance of acquirers.

KeywordsAcquisition choices; Long-run operating performance; Mergersand acquisitions; Short-term market performance; Takeover competition
ANZSRC Field of Research 2020350202. Finance
Byline AffiliationsUniversity of Queensland
Monash University
University of Southern Queensland
Institution of OriginUniversity of Southern Queensland
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