Does the organisational form of the target influence market reaction to acquisition announcements? Australian evidence

Using public, private and subsidiary acquisitions, we examine whether abnormal returns to bidders depend on the organisational form of the target acquired. The evidence supports two main hypotheses: (i) bidders on private and subsidiary targets earn higher abnormal returns than bidders on public entities and (ii) bidders on private targets earn higher abnormal returns when the method of payment is stock. Acquisitions of unlisted public targets, privately negotiated acquisitions of private targets and acquisitions of subsidiaries from listed parents for cash are associated with higher abnormal returns

Target’s organisational form and returns to Australian bidders in cross-border acquisitions

We present large sample evidence on return performances of Australian acquirers who bid for public and private targets in cross-border acquisitions. While placing a particular emphasis on the method of payment and the shareholder protection offered by the target country, we analyse the impact of various bid, firm and foreign-acquisition-specific characteristics on bidding firms’ abnormal returns. We find that Australian investors perceive cross-border acquisitions as value-creating exercises regardless of the organizational form of the target acquired. However, bidders for private targets earn higher return when the method of payment is stock and the targets are located in high investor protection countries. We further find that the abnormal returns are conditional to the relative size of the target, bid frequency, target country destination and the preacquisition financial performance of bidding firms