Professor Mireia Gine will be presenting her paper "Beyond the Target: M&A Decisions and Rival Ownership".
Diversified acquirer shareholders can profit from value-destroying acquisitions not only through their target stakes, but also through stakes in non-merging rival firms. We find that announcement losses are largely mitigated for the average acquirer shareholder when accounting for wealth effects on their rival stakes. Close to a third of acquirer shareholders benefit from bad acquisitions at the industry portfolio level. Rival ownership by acquirer shareholders is negatively associated with acquirer announcement return, but positively associated with the probability of completion of bad deals. Overall, these results show that many so-called “bad deals” are often in the interest of acquirer-firm shareholders.