Presentation on theme: "Bhagat-Shleifer-Vishny (1990) Sample: All hostile takeovers in the U.S. during 1984- 1986 with a purchase price greater than $50 million. OutcomeTable."— Presentation transcript:
Bhagat-Shleifer-Vishny (1990) Sample: All hostile takeovers in the U.S. during 1984- 1986 with a purchase price greater than $50 million. OutcomeTable 1Wall Street Journal p.13June 30, 1997 1984-19861994-May 1997 Sold to bidder 47%38% White knight 33%25% Remained indep. 20%35% Bhagat/Dong/Hirshleifer/Noah (2005): Table 1, Figure 2: Hostile takeovers were common even in the 1990s and early 2000s.
Bhagat-Shleifer-Vishny (1990) Layoffs and Takeover Premium Blue-collar layoffs: Closing of plant, consolidation of production. White-collar layoffs: Headquarter and staff consolidations. To compute the value of labor cost savings from layoffs: (p.20) Pre-tax labor cost is $40K/$100K for blue/white collar workers. Present value of labor cost savings: Assume discount rate of 10%. Savings for 5 years/ in perpetuity. Table 5: When blue-collar layoffs occur: 1493 workers (6.5% of total work force). Savings: 11.1% to 29.2%. Table 4: When white-collar layoffs occur: 660 workers (57.5% of white-collar work force). Savings: 33.6% to 88.3%.
Hostile acquirors / White knights / Remain independent (p.32) 30 hostile acquirors: 10 headquarters sales/closing. 20 white knights: 0 headquarters sales/closings! Premium explained by savings from layoffs: Hostile acquirors: 11%. White knight:5.5%. Independent:18.6%. Bhagat-Shleifer-Vishny (1990)
Increase in Corporate Specialization/Focus after a Hostile Takeover Incident: Page 34: The Importance of Selloffs afterTakeovers Selloffs observed in 42 of the 62 hostile takeover incidents; accounting for 30 percent of the acquisition price.
Bhagat-Shleifer-Vishny (1990) Different Types of Selloffs: –Classic Bustups »Revlon’s acquisition of Frigitronics »First City’s acquisition of Scovill –Retaining some pieces of conglomerates »Quaker Oats buys Anderson Clayton; sells everything except Gaines »Minstar buys AMF and Aegis; sells everything except boat divisions
Bhagat-Shleifer-Vishny (1990) Different Types of Selloffs (continued): –Low-selloff takeovers (usually in same industry) »Pipelines: Coastal acquires American Natural resources »Textile: Walton Monroe Mills acquires Avondale Mills »Publishing: G&W acquires Prentice Hall
Bhagat-Shleifer-Vishny (1990) Mean Acquisition Price Realized through Selloffs – –LBOs vs. non-LBOs: 44% vs. 28% – –Successful vs. Unsuccessful Takeovers: NO difference » »Suggests, as do the layoff results: Firms escaping hostile takeover do most of the things the acquirer would have done anyway.