Tender Offers, Acquisitions, and Subsequent Performance in Manufacturing Firms

• Published in: Academy of Management journal Vol. 31; no. 4; pp. 962 - 974
• Main Authors: Fowler, Karen L., Schmidt, Dennis R.
• Format: Journal Article
• Language: English
• Published: Ada, Ohio, etc Academy of Management 01.12.1988
• Subjects: Acquisitions & mergers; Base year; Beverage industries; Bidding; Business structures; Corporate strategies; Financial management; Profitability; Research Notes; Return on equity; Returns; Shareholders; Stock shares; Stockholders; Strategic management; Strategic planning; Target companies; Tender offers
• ISSN: 0001-4273; 1948-0989
• DOI: 10.5465/256347

The long-term performance of firms that have completed tender-offer acquisitions was examined by forming 3 groups of companies representing bidding, acquiring, and control firms. Bidding firms were taken from Austin Tender Offer Statistics database, and the COMPUSTAT industrial file tapes were used to gather needed financial data. Statistics were taken from the years 1975-1979. Results indicated that the bidding firms showed substantial positive residual returns in the 4-year period before the base year and negative, but not substantial, returns in the 4-year period afterward. These firms also showed substantial differences in the pre- and post-base-year residual returns. Acquiring firms also experienced positive residual returns in the pre-base-year period and negative returns in the post-base-year period, but neither value was significant. From a strategic management viewpoint, the implementation of a major acquisition, especially a tender offer, does not seem to affect financial performance in a favorable manner.