Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )

(Hop HipldF0AV) #1

FIGURE 13.7Hostile versus Friendly Takeovers


Source:Bhide (1989).


Asyoucansee,targetfirmsinhostiletakeovershaveearneda
2.2 percent lower returnonequity, on average, thanother
firms in their industry; they have earned returns for their
stockholdersthatare 4 percentlower thanthemarket;and
only6.5percentoftheirstockisheldbyinsiders.Thetypical
targetfirmischaracterizedbypoorprojectchoiceandstock
price performance as well as low insider holdings.


Postacquisition Actions


Thereisalsoevidencethatfirmsmakesignificantchangesin
theway theyoperate after hostile takeovers.Bhide (1989)
examinedtheconsequencesofhostiletakeoversandnotedthe
following changes:

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