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Acquisition Premia of Distressed Targets - Analysis of the Motives behind the Acquisition of Distressed Targets

Behnke, Jasmin LU and Foukaki, Amalia LU (2012) BUSN89 20121
Department of Business Administration
Abstract
After confirming the fact that distressed targets achieve on average higher acquisition premia than non-distressed ones, the purpose of the thesis is the investigation of an acquirer’s possible rational motives of paying a premium for a distressed target. Particularly, faster synergy realization, lower transaction value, removal of managerial inefficiency, tax benefits and reduction of financial distress are examined. The findings of the study conclude that paying a high premium for a distressed target can indeed be justified, but only as long as the acquirer has the right management team with suitable turnaround skills on board - since the reduction of managerial inefficiency is found to be statistically and economically the most... (More)
After confirming the fact that distressed targets achieve on average higher acquisition premia than non-distressed ones, the purpose of the thesis is the investigation of an acquirer’s possible rational motives of paying a premium for a distressed target. Particularly, faster synergy realization, lower transaction value, removal of managerial inefficiency, tax benefits and reduction of financial distress are examined. The findings of the study conclude that paying a high premium for a distressed target can indeed be justified, but only as long as the acquirer has the right management team with suitable turnaround skills on board - since the reduction of managerial inefficiency is found to be statistically and economically the most important factor in explaining the premium paid for financially distressed acquisition targets. (Less)
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author
Behnke, Jasmin LU and Foukaki, Amalia LU
supervisor
organization
course
BUSN89 20121
year
type
H1 - Master's Degree (One Year)
subject
keywords
Acquisition Premium, Distressed Targets, Synergy Realization, Transaction Value, Managerial Inefficiency, Tax Benefits, Financial Distress
language
English
id
2836019
date added to LUP
2012-06-25 14:36:52
date last changed
2012-06-25 14:36:52
@misc{2836019,
  abstract     = {After confirming the fact that distressed targets achieve on average higher acquisition premia than non-distressed ones, the purpose of the thesis is the investigation of an acquirer’s possible rational motives of paying a premium for a distressed target. Particularly, faster synergy realization, lower transaction value, removal of managerial inefficiency, tax benefits and reduction of financial distress are examined. The findings of the study conclude that paying a high premium for a distressed target can indeed be justified, but only as long as the acquirer has the right management team with suitable turnaround skills on board - since the reduction of managerial inefficiency is found to be statistically and economically the most important factor in explaining the premium paid for financially distressed acquisition targets.},
  author       = {Behnke, Jasmin and Foukaki, Amalia},
  keyword      = {Acquisition Premium,Distressed Targets,Synergy Realization,Transaction Value,Managerial Inefficiency,Tax Benefits,Financial Distress},
  language     = {eng},
  note         = {Student Paper},
  title        = {Acquisition Premia of Distressed Targets - Analysis of the Motives behind the Acquisition of Distressed Targets},
  year         = {2012},
}