Operating Performance Following Corporate Acquisitions: Does the Organisational Form of the Target Matter?

Abstract

We compare long-run operating performances between acquirers of private targets and acquirers of public targets using samples of Australian acquisitions for the period 2000-2010. The acquirers of private targets realise statistically significant positive abnormal returns during the announcement period of completed acquisitions while acquirers of public targets earn normal returns. However, the operating performance of the former group during the post-acquisition period is not significantly different from that of the latter group. The stock-financed acquisitions are not associated with significant performance improvements irrespective of whether this method of payment is used to finance acquisitions of private or public targets. However, there is evidence to suggest that cash-financed acquisitions of public targets are associated with significant performance improvements while no such performance improvements were evident for cash-financed acquisitions of private targets. The concentrated ownership created through acquisitions of private targets is associated with significant improvement in the long-run operating performance for acquirers. Acquisitions of private targets are also associated with significant performance improvements if they are undertaken by experienced acquirers.

Keywords: Mergers and acquisitions, Acquirers of public targets, Acquirers of private targets, Abnormal return; Industry, size and performance-adjusted returns; Cash flow return

JEL Classification: G34, G12, G14