NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Florian S. Peters

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Working Papers

April 2012Winning by Losing: Evidence on the Long-Run Effects of Mergers
with Ulrike Malmendier, Enrico Moretti: w18024
Do acquirors profit from acquisitions, or do acquiring CEOs overbid and destroy shareholder value? We present a novel approach to estimating the long-run abnormal returns to mergers exploiting detailed data on merger contests. In the sample of close bidding contests, we use the loser's post-merger performance to construct the counterfactual performance of the winner had he not won the contest. We find that bidder returns are closely aligned in the years before the contest, but diverge afterwards: Winners underperform losers by 50 percent over the following three years. Existing methodologies, including announcement effects, fail to capture the acquirors' underperformance.

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