Essays on international acquisitions

The purpose of the current manuscript was to examine acquirer and market behavior surrounding a sample of international mergers and acquisitions. The first essay examined the existence of a private company discount and its connections to liquidity. It found that unlisted targets sell for less than their public counterparts, confirming earlier findings. The examination of a connection between the discount and liquidity mostly contradicted earlier studies (Officer 2007), depending on which subsample was selected. The second essay examined the existence of a target price runup preceding acquisitions announcements, existence of a substitution effect between runup and premium, and whether investor protection influenced the two. It confirmed the earlier findings of a significant runup preceding acquisition announcements, with the runup being more pronounced in those targets from weaker investor protection countries. Contrary to Schwert (1996), the study found a significant substitution effect between runup and premium, with the effect stronger if the acquirers are from countries with weak investor protection. The third essay examined acquirer stock price reaction to the three different components of the offer price: target's stand-alone valuation, pre-announcement runup and the offer premium. Each component was found to have an overall insignificant effect on the acquirer stock price in the overall sample. When the targets were from the countries with the weakest investor protection, the study found that the reaction to both the runup and stand-alone target valuation depend on both target and acquirer country investor protection. The study also found that when the targets were from the countries with the weakest investor protection, and only from those countries, acquirer stock price reacted negatively to any individual component of the offer price being higher.