Do Acquisitions Benefit Shareholders?

There is substantial empirical evidence that the shareholders in acquired firms benefit substantially. Gains for this group typically amount to 20 percent in mergers and up 300 percent and above in tender offers above the market price.

The gains to acquiring firms are difficult to measure. The best evidence suggests that shareholders in bidding firms do gain. Losses in value subsequent to merger announcements are not unusual. This seems to suggest that overvaluation by bidding firms is common.

 

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