Performance of M&A Deals Based on Economic Profit and Accounting Approaches: Private Versus Public Targets

Acquisitions of private firms have received less attention in literature than public target deals although the former ones are much more widespread in real market. Takeovers of private companies may lead to different outcomes as being unlisted is associated with many distinguishable features: less transparency, less liquidity, less dispersed ownership. There was a number of stock-based researches and they found out that acquisitions of private targets are more favoured by investors. Furthermore, several determinants influence differently whether target company is listed on stock exchange or not. However, there is a lack of studies investigating actual long-term performance of companies involved in acquisitions of private targets. Moreover, value-based approach was never used to separately examine unlisted target deals. The current study employed both approaches to analyze and compare the long-term performance in the acquisitions of private and public targets held in the USA in 1996-2013. It emerged that takeovers of unlisted companies indeed lead to higher performance improvement than public target deals do. Furthermore, the study discovered a distinguishable role of payment method, involvement of financial advisors and market conjuncture in unlisted target deals.