The Equity Wealth Effects of Method of Payment in Takover Bids for Privately Held Firms

Raymond Da Silva Rosa, R. Limmack, S. Supriadi, David Woodliff

Research output: Contribution to journalArticlepeer-review


In takeover bids for unlisted firms, the typically more closely-knit target shareholders have the bargaining power and incentives to force the bidder's managers to disclose their private information about the value of their firm's shares. The acceptance of share-based offers by private-target shareholders thus conveys favourable information about the net present value of the takeover, unlike the case in share-based bids for listed targets. We document that successful bids for private targets are associated with significantly positive abnormal returns to bidders over the announcement period, a result that diverges from findings based on bids for public targets. Contrary to Chang (1998), share-based bids for Australian private targets are not associated with higher abnormal returns to bidders. Most bids by listed companies for private companies are cash-based and generate a positive return. Our results are consistent with the explanation that lower competition for private targets allows acquirers to capture more of the economic rent from takeovers by offering cash bids.
Original languageEnglish
Pages (from-to)93-110
JournalAustralian Journal of Management
Issue numbersupplement
Publication statusPublished - 2004


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