Anticipating Acquirers

Abstract

Prior literature documents that acquirers earn declining returns to acquisitions as they continue acquiring. Using a novel typology of serial acquirers, we show that subsequent acquisitions by acquirers are predictable ex ante. Controlling for market anticipation, there is little evidence that acquirers earn declining returns in their acquisitions sequence. We also find strong evidence of persistence in performance in acquirers, both for prior winners and prior losers. However persistent winners are not frequent acquirers. Persistent losers appear to be overvalued at the time of the acquisition and pay with overvalued stock, leaving them better off than if they had never acquired. Our methodology significantly enhances our understanding of acquisition dynamics compared to previous studies.

Keywords: Serial acquirers, Mergers, Acquisitions, M&A, Anticipation, Persistence, Misvaluation

JEL Classification: G14; G34; G35