Existing empirical literature has extensively analyzed post-acquisition performance of the acquirers to evaluate success of the takeover. The academic literature tends to agree that target shareholders benefit from takeovers; however takeovers benefits for acquiring firm’s shareholders have been questioned. A majority of empirical literature indicate acquisition announcements are associated with a decrease in acquiring shareholder’s wealth. While pre-acquisition characteristics of takeover targets have been extensively analyzed, empirical literature has not directly and comprehensively analyzed pre-acquisition financial and operating characteristics of the acquiring firms. In this paper, I examine pre-acquisition operating performance and governance characteristics of acquirers. Results suggest that bidders are large firms compared to their industry peers. I also find that bidders are characterized by low insider ownership, high institutional holding and high leverage, indicating higher outside monitoring of the managers. Bidders in general report superior operating performance as indicated by higher return on equity and lower operating expenses. Consistent with existing research, I found that the takeover announcement period abnormal returns are negative for bidders irrespective of their operating performance and governance characteristics.
Paliwal, Rupendra. "Pre-Acquisition Characteristics Of The Acquirers." Review Of Business Research 8.2 (2008): 169-177.