Principles of Private Firm Valuation

107

TABLE 7.1

Takeovers

Private Target Takeovers

Public Target Takeovers

Method of Payment

Stock

Cash

Mixed

Stock

Cash

Mixed

Total number of mergers

1,530

3,973

1,567

856

3,103

1,343

All combined

7,070

5,302

Total merger value

49,056.10

165,620.50

85,106.40

301,328.60

513,765.10

603,497.30

(in $ million)

Value all combined

299,783

1,418,621.00

(in $ million)

Mean acquirer market

1,032.75

1,145.97

519.49

2,109.04

4,193.93

2,594.07

value (in $ millions)

(n

=

979)

(n

=

1,525)

(n

=

804)

(n

=

644)

(n

=

623)

(n

=

347)

Mean merger size

8.14

5.88

12.42

13.22

9.06

17.62

relative to acquirer (%)

% of cross-industry

35.62

49.89

47.1

26.05

71.45

69.99

% of mergers with foreign acquirers

3.14

21.12

12.19

2.1

16.15

9.38

Mean transaction value

$32.06

$41.70

$55.12

$352.96

$165.08

$455.81

(in $ million)

Media offer price/

2.3

2.2

4

2

1.9

1.85

BV premium

(n

=

379)

(n

=

283)

(n

=

317)

(n

=

737)

(n

=

2,277)

(n

=1,042)

Mean target total

$128.66

$160.60

$95.67

$1,782.06

$961.85

$1,395.67

assets (in $ million)

(n

=

583)

(n

=

530)

(n

=

477)

(n

=

789)

(n

=

2,560)

(n

=1,174)

Mean acquirer total

$4,658.93

$5,320.04

$2,260.18

$10,645.46

$8,939.07

$6,980.96

assets (in $ million)

(n

=

509)

(n

=

499)

(n

=

417)

(n

=

654)

(n

=

633)

(n

=

349)

Mean acquirer

q

1.47

1.04

1.05

1.57

1.01

1.15

(n

=

141)

(n

=

363)

(n

=

157)

(n

=

125)

(n

=

298)

(n

=

126)

Mean two-day CAR

1.32*

1.83*

1.99*

−1.26*

0.06

0.14

for acquirers (%)

(n

=

979)

(n

=

1,525)

(n

=

804)

(n

=

644)

(n

=

623)

(n

=

347)

Different data items are provided for a sample of privately held target takeovers and a sample of publicly traded target takeov

ers, classified by the method of payment, over

the period from January 1984 to June 1996. All value-based variables are adjusted for inflation using 1995 as the base year. St

ock offers are defined as transactions made solely

in stock, whereas cash offers are transactions made solely in cash, or cash and debt. Mixed offers include offers consisting of

both cash and stock and/or convertibles. The mar-

ket values for acquiring firms are measured 11 days before the merger announcement day. The mean merger size relative to acquir

er’s market value and the total transaction

value. The percent of cross-industry mergers refers to the percentage of all mergers in that method of payment category that in

volve an acquirer and a target with different

two-digit SIC codes. Likewise, the percent of mergers with foreign acquirers provides the percentage of mergers, in a particula

r method of payment group, involving acquirers

from outside the United States. The offer price/BV premium is the total transaction value paid for the target divided by the pr

ivate target’s book value of equity. The acquirer

q

is based on the Chung and Pruitt (1994) estimation. Also, the acquirer’s two-day cumulative abnormal return (CAR) is measured o

n days 0 and 1, where day 0 is the takeover

announcement day. An asterisk (*) beside the acquirer’s CAR denotes significance at the 1 percent level. The numbers in parenth

eses reflect those cases for which a particular

data item was variable. Values shown were generated from information provided by Securities Data Company and from CRSP data.