Consolidation and Merger of Corporations--United States

Takeovers of privately-held targets have outnumbered takeovers of publiclytraded
targets over the years. This dissertation focuses on takeover activities of privatelyheld
targets and examines several important issues which have never been touched on in
the literature. The first essay examines the factors that determine the choice between a
privately-held target and a publicly-traded target. After the size of the target and the
prevalence of private firms in each industry in each year are controlled for, I find that the
stock bidder tends to target a privately-held firm and the cash bidder tends to target a
publicly-traded firm when pursuing a high-tech target. When acquiring a firm in the same
industry and being inexperienced in takeover activities, the bidder is more likely to target
a publicly-traded firm as opposed to a privately-held firm. The passage of the SarbanesOxley
Act (SOX) also has an affect on the choice of a privately-held target or a publiclytraded
target; everything else being equal, the cash bidder is more likely choose to
acquire a private firm while the stock bidder is less likely to choose a private firm upon
the introduction of SOX. The second essay examines the factors that influence the choice
of stock versus cash payment in takeovers of privately-held targets. Stock is found to be more frequently used among takeovers in which the bidding firm has more debt and less
free cash flow prior to the deal , the target is a high-tech firm, and the target management
is retained in the combined entity. In addition, since the adoption of SOX, cash has been
used more frequently and to greater extent among the sample of takeovers of privatelyheld
targets. The third essay examines the effects of restrictions on resale of stock issued
in takeovers on the bidder's wealth effect and long-run stock price performance. I find
that restrictions on resale of stock are more popular among takeovers of privately-held
targets as compared to takeovers of publicly-traded targets. Restrictions on resale are
found to be positively related to the bidder's announcement abnormal return and
negatively related to the bidder's long-run stock price performance.

The purpose of this study is to develop and empirically test theories on wealth effects surrounding acquisitions by investment bankers. The primary research objective deals with strong-form market efficiency. The test strives to determine if the results of information held by investment bankers are attributable to inside information or information that is available to anyone willing to research and analyze particular target firms. A second research objective is to examine why larger wealth effects are expected. Potential reasons examined include internal and external governance issues, as well as acquisition activity as a means of governance. Specific issues examined are (1) a change in the chief executive officer after acquisition, (2) a change in the board of directors after acquisition, (3) an increase in the debt ratio of the target firm after acquisition, (4) downsizing and/or exiting from an industry after acquisition, and (5) to stop the selection of poor acquisitions by the target firm. The relative size of the acquisitions is controlled for in both groups; economies of scale realized from horizontal or vertical acquisitions are controlled for in the case of the control group. A comparison of the wealth gains between the two groups reveals that investment bankers outperform non-investment bankers when the average holding period abnormal return is used as the wealth measure. However, when cumulative average abnormal returns are compared, the non-investment banker group realizes higher wealth gains than the investment bankers. In no case does either group outperform a market index, the S&P 500. The results of the wealth effect tests support strong-form market efficiency; investment bankers do not utilize private information to realize gains from closely-held information. Primarily, downsizing is associated with positive effects on the stock price returns of target firms in partial acquisitions by investment bankers. Non-investment banker partial acquisitions are characterized with a change in the chief executive officer of the target firm. This change, however, is negatively associated with the share price returns of the target firms.