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The Acquisition of Non Public Firms in Europe: Bidders’ Returns, Payment Methods and Stock Market Evolution

This paper studies the returns of non public firms acquisitions. Like the American studies do, we show the existence of a “non public firms acquisition effect” for the European multi-acquirer firms: abnormal returns are much higher for non-public firms (subsidiaries or private held firms) than for public firms. Our results also show that the returns are influenced by the stock market cycles: the returns are significantly higher when the market is bullish than when it is bearish. According to us, this result is consistent with Shleifer and Vishny (1988) and with Amihud and Lev (1981) and can be explained by agency phenomena. Indeed, we think that when the market is bearish, managers have incentive to compensate for the decrease of their income if it is index-linked to the performance of the firm, thanks to deals that will maximize their own wealth, at the risk of destroying value for their shareholders.