Target Performance, Pre-Bid Run-Up Premiums, Competitive Bidding and Successful Takeovers: Hostile versus Friendly Offers

This paper empirically investigates the causes and immediate consequences of hostile takeovers in the U.S. over the 1990-1995 period. We find no indications of poor target performance over the five years prior to the takeover announcement. However, there is strong evidence that hostile takeovers do perform a correction for target managerial failure with respect to the performance of comparable friendly targets. Moreover, the type of offer is strongly related to the size, capital structure and industry of the target firm, and to the general trend of the M&A market.