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The Success of Acquisitions: Evidence from Divestitures

Steven N. Kaplan and Michael S. Weisbach
The Journal of Finance
Vol. 47, No. 1 (Mar., 1992), pp. 107-138
Published by: Wiley for the American Finance Association
DOI: 10.2307/2329092
Stable URL: http://www.jstor.org/stable/2329092
Page Count: 32
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The Success of Acquisitions: Evidence from Divestitures
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Abstract

This paper studies a sample of large acquisitions completed between 1971 and 1982. By the end of 1989, acquirers have divested almost 44% of the target companies. We characterize the ex post success of the divested acquisitions and consider 34% to 50% of classified divestitures as unsuccessful. Acquirer returns and total (acquirer and target) returns at the acquisition announcement are significantly lower for unsuccessful divestitures than for successful divestitures and acquisitions not divested. Although diversifying acquisitions are almost four times more likely to be divested than related acquisitions, we do not find strong evidence that diversifying acquisitions are less successful than related ones.

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