Core-related acquisitions, multiple bidders and tender offer premiums

This research analyzes the impacts of core-relatedness and multiple bidders on premiums paid in 285 tender offers for US-based manufacturing firms. In a core-related M&A, the primary business of the acquirer is the same, vertically connected to or similar to the primary business of the target firm. This study proposes and finds a large interaction effect between the impacts of core-relatedness and multiple bidders on tender offer premiums. The presence of multiple bidders is found to have a greater impact on tender offer premiums when the eventual acquirer is not core-related to the target. In other words, acquirers that are not core-related to the firms they purchase, tend to pay very high premiums when multiple bidders compete for the target. Results show that the direct relationships between core-relatedness and premiums as well as the direct relationship between multiple bidders and premiums depends on the state of the interaction effect. (C) 2003 Elsevier Science Inc. All rights reserved.