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Corporate Takeover Targets: Acquisition Probability


The term “takeover”, of which the first form is mergers and acquisitions (M&A), refers to the transfer of control of a business from one group of shareholders to another. Considering the importance of this issue and the real drives behind takeovers, it has become imperative to identifying companies that are vulnerable to takeover by two types: tender offer and exchange offer.

This book thus presents the legal aspects, the theoretical justifications and the empirical contributions of takeovers, and analyzes the economic and financial characteristics of targets in order to assess the probability of being acquired. An empirical approach based on two quantitative studies is then applied to the European market, which is still virgin territory in terms of academic research. Finally, acquisition probability models have been developed and they have a 72% forecast accuracy average rate of targets.

Corporate Takeover Targets is aimed at students and researchers in economic and management, as well as M&A consultants.

Introduction  ix

Part 1. Corporate Takeovers: Theoretical Justifications and Empirical Contributions  1

Introduction to Part 1  3

Chapter 1. Economic and Legal Framework of Takeover Bids in Europe 5

1.1. Corporate takeover: general description  6

1.1.1. The control 6

1.1.2. The takeover concept 8

1.1.3. Techniques and classification of M&A  9

1.1.4. Conclusion 14

1.2. The economic impact of takeover bids 15

1.2.1. Global development over the period 1990-2000 16

1.2.2. Characteristics of the recent M&A wave: 2001-2007 26

1.3. Regulation and control of takeover bids in Europe . 34

1.3.1. Merger and acquisition control in Europe 35

1.3.2. The role of public authorities  38

1.3.3. Harmonization of regulations on takeover bids within the European Union  42

1.4. Conclusion 46

Chapter 2. Motivations and Economic Role of Takeover Bids: a Theoretical and Empirical Characterization 49

2.1. Economic interpretation of takeover bids and plurality of their theoretical references 50

2.1.1. Economic justifications for takeover bids  50

2.1.2. Plurality of theoretical references on the potential effectiveness of takeover bids 60

2.1.3. Conclusion 67

2.2. Performance and effectiveness of takeover bids: results of empirical research  68

2.2.1. Short term performance of companies: around the event date  70

2.2.2. Long-term acquisition performance: bnormal post acquisition return  77

2.2.3. Conclusion 81

2.3. Motivations of takeover bids: results of empirical research  82

2.3.1. Empirical studies on targets profile  84

2.3.2. Empirical studies of acquiring companies’ profiles 98

2.3.3. Joint empirical studies of the profiles of acquirers and targets 100

Part 2. Exploration of Predictive Variables for Takeover Bids and Forecast of European Targets 105

Introduction to Part 2  107

Chapter 3. Detection of Predictive Variables for Corporate Takeover: an Exploratory Study  109

3.1. Conceptual and empirical framework: theoretical positioning, survey characteristics and choice of data analysis method 109

3.1.1. The theoretical positioning of the exploratory study 110

3.1.2. The questionnaire characteristics  111

3.1.3. Statistical analysis of responses  113

3.2. Results of empirical tests: exploratory factor analysis in principal components 114

3.2.1. Reliability and validity of the measurement scale  114

3.2.2. Qualitative analysis of responses  116

3.2.3. Results of the exploratory factor analysis of variables 122

3.2.4. Conclusion 132

Chapter 4. Developing a Takeover Prediction Model: The European Case 135

4.1. Empirical analysis: hypotheses, sample selection and statistical methodology 136

4.1.1. Formulation of hypotheses and measurement variables 136

4.1.2. Selection of samples and data collection 150

4.1.3. Methodological choices and statistical processing  156

4.1.4. Conclusion 161

4.2. Modeling takeover bids in Europe: predicting takeover targets 162

4.2.1. Univariate analysis results  163

4.2.2. Results of the multivariate analysis  176

4.2.3. Performance and predictive ability of the developed models 193

4.2.4. Conclusion 201

Conclusion 203

Bibliography 209

Index 221