- Manyofthehostiletakeoverswere followedbyan
increaseindebt,whichresultedinadowngradingof
thedebt.Thedebtwasquicklyreducedwithproceeds
from the sale of assets, however. - There wasno significantchange in the amount of
capital investment in these firms. - Almost 60 percentofthetakeoverswerefollowedby
significantdivestitures,inwhichhalformoreofthe
firmwasdivested.Theoverwhelmingmajorityofthe
divestitureswereunitsinbusinessareasunrelatedto
the company’score business (i.e.,they constituted
reversal ofcorporate diversification done in earlier
time periods). - Thereweresignificantmanagementchangesin 17 of
the 19 hostiletakeovers,withthereplacementofthe
entire corporate management team in seven of the
takeovers.
Another study of acquisitions of 288 distressed firms by
so-called vulture investors provides evidence of improved
operating performance after the acquisitions.
41 Thus, contrary to popular view,
42 most hostiletakeoversarenot followedbytheacquirer
strippingtheassetsofthetargetfirmandleadingittoruin.
Instead, target firms refocus on their core businesses and
often improve their operating performance.
Valuing Publicly Traded Companies
Thereisawidelyheldmisconceptionthatcontrolisanissue
only whenyoudoacquisitions. Tothecontrary,we would
argue that the stock price of every publicly traded firm
includes an expectedvalue for control, reflecting both the