acquisitions rather than looking at all acquisitions. If the
essenceofthevalueofcontrolisthatyoucanchangetheway
a company is managed, it is unlikely that the incumbent
managersofatargetfirmwillassenttoafriendlytakeover
when the primary motive is control.
Next, we can eliminate all hostile acquisitions where the
acquirer is another firm. After all, synergy requires the
existenceoftwoorganizationsandcannotexistifthetarget
firmstandsaloneaftertheacquisitions.Bylookingathostile
acquisitionswherethetargetfirmremainsindependentafter
thedeal,weatleastnarrowthepremiumpaidtojustcontrol
and overpayment. While the average premium
38 paidfortargetfirmsin acquisitionsintheUnitedStates
hasbeenbetween 20 and 30 percentinthe1980sand1990s,
the premiums tend to be slightly higher for hostile
acquisitions.
39 In addition, bidding firm returns, which tend to be
negligible or slightly negative across all acquisitions, are
muchmorepositiveonhostileacquisitions.Insummary,the
perceived benefits from control in hostile acquisitions are
large, and markets tend to view such acquisitions favorably.
Target Firm Characteristics
The strongest support for the existence of a market for
corporatecontrolliesinthetypesoffirmsthataretypically
acquiredinhostiletakeovers.Earlierinthischapter,wenoted
thatpooroperatingperformanceandstockpriceperformance
aregoodindicatorsfortargetfirmsinhostileacquisitions.A
comparisonoftargetfirmsinhostileandfriendlytakeovers,
summarized inFigure 13.7, illustrates their differences.
40