Shareholder wealth effects of corporate takeovers

Abstract

This paper examines the effects of over 1,800 U.K. takeovers on shareholder wealth in the period 1955–1985. It shows that around the merger announcement date targets gain 25 to 30 percent and bidders earn zero or modest gains. The U.K. data allow independent tests of many issues addressed in studies of U.S. takeovers. Target gains are higher in the U.K. after 1968, suggesting that increases in U.S. target gains at the same time may not be attributable to the Williams Act. Postmerger share-price performance suggests that acquisitions follow favorable developments in bidder's equity prices.