Serial acquirers and decreasing returns: Do bidders’ acquisition patterns matter?

• Published in: The Financial review (Buffalo, N.Y.) Vol. 56; no. 3; pp. 407 - 432
• Main Author: Morillon, Thibaut G.
• Format: Journal Article
• Language: English
• Published: Knoxville Wiley Subscription Services, Inc 01-08-2021; Blackwell Publishing Ltd
• Subjects: acquirer returns; Acquisitions & mergers; Bids; decreasing returns; mergers and acquisitions; serial acquirers
• ISSN: 0732-8516; 1540-6288
• DOI: 10.1111/fire.12253

This paper examines the phenomenon of declining announcement returns of serial acquirers. Using a classification of acquirers based on their patterns of acquisition, I find that decreasing returns occur mostly within “blocks” of acquisitions. This trend is driven by bidders who acquire targets quickly in chunks. In contrast, I find no evidence of any such decline in returns for the most active acquirers in the market of corporate control. I test several theories proposed by the prior literature to explain declining returns and find evidence consistent with temporary overvaluation, agency costs, and bidder learning as likely drivers.