somecases,acompetingbidderwillenteranddriveupthe
price. With private businesses, especially smaller ones,
openingupthebiddingprocesstootherbiddersismuchmore
difficulttodo.Consequently,acquirersarefarmorelikely,
withanygivensynergyvalue,toextractalargerproportionof
that value.
Evidence on Synergy Sharing
In the preceding section, we looked at evidence that is
consistent with theexistenceof synergy in manymergers.
However, this does not always translate into gains for
acquiring companystockholders,sincethat dependson the
pricepaid fortheacquisition.The cumulativeevidence on
acquisitionsuggeststhatthestockholdersoftargetfirmsare
the clear winners in takeovers—they earn significant returns
27 notonlyaroundtheannouncementoftheacquisitions,but
alsointheweeksleadinguptoit.In1983,JensenandRuback
reviewed 13 studies that look at returns around takeover
announcementsandreportedanaveragereturnof 30 percent
to target stockholders in successful tender offers and 20
percent to target stockholders in successful mergers.
28 In1988,Jarrell,Brickley,andNetterexaminedtheresults
of 663 tenderoffersmadebetween 1962 and 1985 andnoted
thatpremiumsaveraged 19 percentinthe1960s, 35 percentin
the 1970s, and 30 percent between 1980 and 1985.
29 The return behavior of a typical target firm in an
acquisition is illustrated in Figure 15.3, from one of the
studies,
30 in the 20 days before and after an acquisition
announcement.