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1. Event Returns – They represent the market’s best judgement of the long run prospects of an announced merger, divestiture, restructuring or other adjustment activities.
2. Longer-run Performance – It is a reliable basis to determine the performance of a post M&A.
3. Bad Bidders become Good Targets – Some studies have observed that when acquiring firms experience negative event returns, they subsequently become a likely takeover targets.
4. Efficiency Pressures – Early studies found that as high as 2/3 of the M&As did not earn the bidder’s cost of capital but later studies reported a decline of that failure rate. Note: If a firm underperforms, it is likely to become a takeover target.
francis1897 answered the question on February 27, 2023 at 06:50
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