Solving Serial Acquirer Puzzles

Acquirer Types and M&A Puzzles

Authors

Antonio J. Macias

Baylor University

P. Raghavendra Rau

University of Cambridge

Aris Stouraitis

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences

Abstract

Using a novel typology of serial acquirers, we solve several puzzles documented in prior literature. We show that acquisitions by different types of acquirers are driven by different factors, they acquire different sizes of targets, and subsequent acquisitions by acquirers are predictable ex ante. Controlling for market anticipation, the most frequent serial acquirers do not earn declining returns as they continue acquiring, while less frequent acquirers do. Our methodology significantly enhances our understanding of acquisition dynamics, anticipation, and economic value adjustments. The methodology is likely to be relevant to topics related to event anticipation beyond those covered in this study.