Premerger Discrimination between Acquirer and Targets

Dogus University Journal, Vol. 4, pp. 71-90, 2001

19 Pages Posted: 24 Mar 2006

Abstract

This paper examines the premerger discrimination between acquirers and targets using a sample of 56 mergers from U.S. economy. The research findings indicate that acquirers and targets discriminate in terms of size, liquidity and cash flow dimensions, while no statistically significant discrimination are detected in terms of growth potential, past market returns and operating efficiency. The subsample studies show that diversifying mergers aim to exploit cash flow potential of targets, whereas related mergers focus on growth potential. The premerger financial properties of acquirer and targets bear informational clues about method of payment in mergers. Strategic analysis of portfolio shifts show that value acquirers aim to purchase companies with higher growth potential, whereas growth bidders aim to purchase companies with stronger cash flow record.

Keywords: merger, premerger discrimination

JEL Classification: G34, L49

Suggested Citation

Muslumov, Alovsat, Premerger Discrimination between Acquirer and Targets. Dogus University Journal, Vol. 4, pp. 71-90, 2001, Available at SSRN: https://ssrn.com/abstract=890074

Alovsat Muslumov (Contact Author)

Dogus University ( email )

Zeamet Sok. 21
Acibadem, Kadikoy
Istanbul, 34722
Turkey

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