Strategic vs. financial acquirers : an empirical study of differences in premium payments and target company preferences between strategic and financial acquirers in M&A

Abstract

This master thesis examines differences in the takeover strategies between strategic and financial buyers. By using SEC merger filings, we study the phase of transactions that occur before deals are made public. The detailed data from the merger filings enables us to include variables that most M&A research overlook. We find that strategic buyers paying in cash pay the highest premiums, but also that financial and strategic firms do not bid on the same target companies. In transactions with a strategic acquirer, 91% of bidders are strategic. In transactions with a financial acquirer, only 14% of bidders are strategic. Something seems to be separating these two acquirer groups, and this is what we attempt to uncover in this thesis. Through various probit regressions, we find that targets with higher R&D expenses and targets with higher operating expenses are more appealing to strategic buyers. We also discover that when targets engage investment banks to find buyers, the acquirer is more likely to be financial.