Title

Partial acquisitions, the acquisition probability hypothesis, and the abnormal returns to partial targets

Authors

Authors

A. Akhigbe; A. D. Martin;A. M. Whyte

Comments

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Abbreviated Journal Title

J. Bank Financ.

Keywords

partial acquisition; acquisition probability; takeover; toehold; abnormal returns; FREE CASH FLOW; CORPORATE-CONTROL; EMPIRICAL-ANALYSIS; SHAREHOLDER; WEALTH; TAKEOVER CONTESTS; TOEHOLDS; OWNERSHIP; MARKET; DIVISION; SUCCESS; Business, Finance; Economics

Abstract

The acquisition of a partial stake in a target firm has been positively linked to the likelihood that the target will be involved in a follow on full acquisition involving either the original bidder or a third party bidder. Existing studies provide only suggestive evidence of this linkage by comparing the abnormal returns to partial targets that are ultimately acquired to those that are not. Using a sample of partial acquisitions, we identify characteristics that impact the probability of a full acquisition and provide a tangible link between partial target gains and the ex ante probability of acquisition. Partial targets experience positive announcement effects, and the gains are greater for subsequently acquired targets. Partial bids initiated by corporate bidders are more likely to result in a full acquisition, and the size of the acquired stake and the level of institutional ownership are positively linked to the probability of acquisition. Further, the partial target gains are positively linked to the ex ante probability of acquisition even after controlling for any increased monitoring and discipline that the partial bidder is expected to impose. The findings are robust across various time horizons and model specifications. (C) 2007 Published by Elsevier B.V.

Journal Title

Journal of Banking & Finance

Volume

31

Issue/Number

10

Publication Date

1-1-2007

Document Type

Article

Language

English

First Page

3080

Last Page

3101

WOS Identifier

WOS:000250349400007

ISSN

0378-4266

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