The interplay between target firm R&D, acquirer debt financing and takeover premia
Publication type
Journal article with impact factorPublication Year
2018Journal
Applied Economics LettersPublication Volume
25Publication Issue
7Publication Begin page
451Publication End page
455
Metadata
Show full item recordAbstract
The level of acquisition premia is of paramount importance in light of the vast sums paid to target shareholders and the often disappointing returns realized by corporate buyers. In this letter, we focus on the impact of R&D investments by targets on the acquisition premium contingent upon the acquirer's financing choices. Based on a unique hand-collected sample of 407 listed European transactions, we find a positive effect of target R&D on premia paid. Yet, when acquirers finance the acquisition of an R&D intensive target with debt, the positive relation disappears. Consequently, we establish that financing sources affect bidding strategies of acquiring companies in case of difficult-to-value targets.Knowledge Domain/Industry
Accounting & Financeae974a485f413a2113503eed53cd6c53
10.1080/13504851.2017.1332740