The Intra-Industry Effects of Going-Private Transactions

We demonstrate that bids to take firms private generate significantly positive valuation effects for industry rivals of target firms. These valuation effects cannot reflect either synergy or monopoly since no consolidation of operating firms is involved in such transactions. Participation by buyout...

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Bibliographic Details
Published in:The Journal of finance (New York) 1991-09, Vol.46 (4), p.1537-1550
Main Authors: SLOVIN, MYRON B., SUSHKA, MARIE E., BENDECK, YVETTE M.
Format: Article
Language:English
Subjects:
Bids
Business structures
Buyouts
Comparative studies
Conflict management
Effects
Enterprises
Financial management
Going private
Incumbents
Industrial management
Industrial market
Industry
Leveraged buyouts
Management buyouts
Regression analysis
Rivalries
Shareholders
Shareholders wealth
Shorter Papers
Target company
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Summary:We demonstrate that bids to take firms private generate significantly positive valuation effects for industry rivals of target firms. These valuation effects cannot reflect either synergy or monopoly since no consolidation of operating firms is involved in such transactions. Participation by buyout specialists in the bid does not significantly affect these gains. Bids by outsiders and bids by incumbent managers generate similar valuation effects for industry rivals. The effect on share prices of industry rivals is inversely related to the capitalized values of rival firms relative to the target firm. We also report valuation effects for target firms.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.1991.tb04630.x