Why do private acquirers pay so little compared to public acquirers?

Why do private acquirers pay so little compared to public acquirers? Using the longest event window, we find that public target shareholders receive a 63% (14%) higher premium when the acquirer is a public firm rather than a private equity firm (private operating firm). The premium difference holds with the usual controls for deal and target characteristics, and it is highest (lowest) when acquisitions by private bidders are compared to acquisitions by public companies with low (high) managerial ownership. Further, the premium paid by public bidders (not private bidders) increases with target managerial and institutional ownership. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

Why do private acquirers pay so little compared to public acquirers?

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Publisher
Elsevier
Copyright
Copyright © 2008 Elsevier B.V.
ISSN
0304-405x
D.O.I.
10.1016/j.jfineco.2007.11.005
Publisher site
See Article on Publisher Site

Abstract

Using the longest event window, we find that public target shareholders receive a 63% (14%) higher premium when the acquirer is a public firm rather than a private equity firm (private operating firm). The premium difference holds with the usual controls for deal and target characteristics, and it is highest (lowest) when acquisitions by private bidders are compared to acquisitions by public companies with low (high) managerial ownership. Further, the premium paid by public bidders (not private bidders) increases with target managerial and institutional ownership.

Journal

Journal of Financial EconomicsElsevier

Published: Sep 1, 2008

References

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