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TAKEOVERS, MANAGEMENT REPLACEMENT, AND POST‐ACQUISITION OPERATING PERFORMANCE: SOME EVIDENCE FROM THE 1980s

TAKEOVERS, MANAGEMENT REPLACEMENT, AND POST‐ACQUISITION OPERATING PERFORMANCE: SOME EVIDENCE FROM... In their study of 197 U.S. takeovers from the 1980s, the authors find that the most important determinant of superior post‐merger operating performance is whether the target company's management is replaced or retained. When the target CEO is replaced, the post‐merger firm's annual cash flow returns outpace industry standards by 2 to 3%. In contrast, when target top management remains after the merger, operating returns do not exceed industry averages. The effect of management replacement is even more pronounced in those cases where the industry is consolidating. But, for those takeovers that are followed by significant investment (and thus presumably in growth industries), management replacement does not make a significant difference in post‐acquisition performance. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Corporate Finance Wiley

TAKEOVERS, MANAGEMENT REPLACEMENT, AND POST‐ACQUISITION OPERATING PERFORMANCE: SOME EVIDENCE FROM THE 1980s

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References (1)

Publisher
Wiley
Copyright
Copyright © 1999 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1078-1196
eISSN
1745-6622
DOI
10.1111/j.1745-6622.1999.tb00518.x
Publisher site
See Article on Publisher Site

Abstract

In their study of 197 U.S. takeovers from the 1980s, the authors find that the most important determinant of superior post‐merger operating performance is whether the target company's management is replaced or retained. When the target CEO is replaced, the post‐merger firm's annual cash flow returns outpace industry standards by 2 to 3%. In contrast, when target top management remains after the merger, operating returns do not exceed industry averages. The effect of management replacement is even more pronounced in those cases where the industry is consolidating. But, for those takeovers that are followed by significant investment (and thus presumably in growth industries), management replacement does not make a significant difference in post‐acquisition performance.

Journal

Journal of Applied Corporate Finance – Wiley

Published: Jan 1, 1999

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