Takeover Activity as a Response to Time‐Varying Changes in Investment Opportunity Sets: Evidence from Takeover Sequences

Sandy Klasa · Mike A. Stegemoller

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Corporate Finance and Governance Financial Markets and Investment Strategies Private Equity and Venture Capital

Abstract

We study takeover sequences that contain at least five acquisitions made over a period greater than 12 months, with no two acquisitions separated by more than 24 months. Acquisitions made within such sequences represent more than a quarter of aggregate takeover activity by U.S. public firms from 1982–1999. Our fi ndings are consistent with a proposition that takeover sequences occur in the context of time‐varying changes in an acquirer's growth opportunity set. Takeover sequences begin (end) subsequent to an expansion (contraction) of this opportunity set.

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References

1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1996Agency costs of free cash flow, corporate finance, and takeovers 1997Industry costs of equity 1986The Hubris Hypothesis of Corporate Takeovers 2003Stock market driven acquisitions 1999Corporate Cash Reserves and Acquisitions 2002What Do Returns to Acquiring Firms Tell Us? Evidence from Firms That Make Many Acquisitions 1990Does Corporate Performance Improve After Mergers?

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2020Revisiting acquirer returns: Evidence from unanticipated deals 2015Mergers, CEO Hubris, and Cost Stickiness 2012Are Good Performers Bad Acquirers?2013Skill differences in corporate acquisitions 2012The performance of frequent acquirers: Evidence from emerging markets 2021Learning‐by‐doing: the experience effect in mergers and acquisitions

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