Kauppakorkeakoulun julkaisuportaali
Aalto-yliopiston kauppakorkeakoulun gradujen tiedot nyt Aaltodocissa: Aaltodoc-julkaisuarkisto
Kauppakorkeakoulu | Rahoituksen laitos | Rahoitus | 2012
Tutkielman numero: 13011
Determinants affecting the magnitude of bid premium: Evidence from European Union 2000-2011
Tekijä: Parmanne, Tomi
Otsikko: Determinants affecting the magnitude of bid premium: Evidence from European Union 2000-2011
Vuosi: 2012  Kieli: eng
Laitos: Rahoituksen laitos
Aine: Rahoitus
Asiasanat: rahoitus; financing; yrityskaupat; corporate acquisitions; hinnat; prices; omistus; ownership
Sivumäärä: 87
Avainsanat: announcement effect; abnormal return; bargaining power; bid premium; toehold

The purpose of this study is to examine different explanatory factors behind the magnitude of bid premium paid in corporate acquisitions. Synergy creation and bargaining power is emphasized when evaluating the strength of the chosen determinants. Furthermore bid premiums relation to target and a bidder abnormal return is studied. Since corporate acquisitions are often the biggest investments that companies undertake, it is essential to understand factors that commonly have an impact on deal price.


The data set consists acquisitions that have taken place within the European Union during January 2000 to November 2011. Acquisitions with deal value less than 10 million euro are excluded from the final sample of 647 acquisitions. Data regarding determinants explaining the size of the bid premium are gathered from SDC Platinum and Thomson ONE Banker databases. Data regarding abnormal returns is collected from Datastream.

Determinants' explanatory power is researched by using OLS-regression, having bid premium as the dependent variable. Main focus is in premium that is calculated four weeks prior the announcement. Bid premium's relation to announcement effect is tested by using [-20, +20] time window.


Statistically significant positive relation to bid premium was found when there are multiple bidders involved, when the acquisition type is cross-border and when the bigger the size difference between bidder and target is. On the contrary, having a toehold has a significant negative correlation to the amount of bid premium.

As expected, bid premium and target abnormal returns have a strong positive correlation. However, a vice versa relation was not found to apply bidder abnormal returns. In fact when the deal price was less than target's market value, bidders' cumulative average abnormal return was negative.
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