Skip to content
Product cover

Which Takeovers Are Profitable? Strategic or Financial?

July 15, 1997 | Paul M. Healy , Krishna G. Palepu , Richard S. Ruback | Strategy

Are friendly takeover transactions between firms in overlapping businesses likely to be more profitable to acquirers than hostile takeovers involving firms in unrelated businesses? In a detailed study, the authors examine strategic and financial takeovers to determine which generated gains for acquirers, using the fifty largest U.S. industrial takeovers from 1979 to mid-1984 as their sample.

Healy et al. also studied the relation between takeover profitability and three characteristics of the transactions that company management controlled:

1. The target company managers' attitudes, which generally predicted the acquiring company's plans for the target firm.

2. The form of payment, i.e., equity financing or stock and debt securities.

3. The degree of overlap between the merging firms' businesses. High overlap gave the targets and acquirers synergistic gains.

Were the takeovers profitable? The results show that takeovers do improve performance, but the insignificant industry-adjusted cash flow returns after takeover indicate that the improvement was insufficient for the acquirer to earn returns beyond those required to justify the premium. Which takeovers were more profitable? The results show that strategic or friendly takeovers generated substantial gains for acquirers. Financial, or unfriendly, transactions broke even at best.

The authors also examined how investors' expectations related to the subsequent results of the takeovers. The market did not seem to recognize the difference in profitability between strategic and financial transactions.

Purchase Options

Educator and Student Discounts Available. Learn more »

  BENCHMARKS  
Loading Time: Base Classes  0.0006
My Controller Construct  0.0003
Build Nav  0.0006
Controller Execution Time ( Products / Route )  0.1015
Total Execution Time  0.1021
  GET DATA  
No GET data exists
  MEMORY USAGE  
1.5560 MB
  POST DATA  
No POST data exists
  URI STRING  
store/which-takeovers-are-profitable-strategic-or-financial
  CLASS/METHOD  
products/route
  DATABASE:  MITSLOAN_DEV   QUERIES: 68  (Hide)
0.0003  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '4bbb4c3de0d9dd2121ef400fac37ee0d'
ORDER BY `created_at` DESC 
0.0002  

SELECT SQL_CALC_FOUND_ROWS cat_id
FROM (`product_categories`)
WHERE `status_id` =  'A'
AND `url_friendly` =  'which-takeovers-are-profitable-strategic-or-financial'
AND `parent_id` =  1 
0.0099  

SELECT c.parent_id, c.format_id
                    FROM products AS p, products AS c
                    WHERE p.prod_id = c.parent_id AND
                        c.avail_id IN ('A','B','D') AND
                        c.type_id = 'V' AND
                        (
                            c.sku = 'which-takeovers-are-profitable-strategic-or-financial' OR
                            if(c.format_id = 'Certificate', '', p.url_friendly) = 'which-takeovers-are-profitable-strategic-or-financial'
                        )
                    LIMIT 1 
0.0002  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  2319 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '2319' 
0.0003  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '2319'
ORDER BY `sort` ASC 
0.0001  

SELECT `cat_id`
FROM (`product_categories__products`)
WHERE `prod_id` =  '2319' 
0.0001  

SELECT *
FROM (`product_flags__products`)
WHERE `prod_id` =  '2319' 
0.0002  

SELECT `sku`
FROM (`products__xsell`)
WHERE `prod_id` =  '2319'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0650  

SELECT `products`.`parent_id`
FROM (`transaction_lines`)
JOIN `products` ON `products`.`sku` = `transaction_lines`.`sku`
JOIN `product_categories__products` ON `products`.`parent_id` = `product_categories__products`.`prod_id`
WHERE `products`.`avail_id` =  'A'
AND TO_DAYS(transaction_lines.updated_at) < (TO_DAYS(NOW()) - 90)
AND `product_categories__products`.`cat_id` IN ('249') 
GROUP BY `products`.`parent_id`
ORDER BY COUNT(*) DESC
LIMIT 6 
0.0002  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '361' 
0.0005  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '361' 
0.0003  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '361'
ORDER BY `sort` ASC 
0.0016  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '3961' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '3961' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '3961'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '35' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '35' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '35'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '179' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '179' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '179'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '489' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '489' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '489'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '2465' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '2465' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '2465'
ORDER BY `sort` ASC 
0.0003  

SELECT SQL_CALC_FOUND_ROWS media_id, position
FROM (`media`)
WHERE `foreign_key_table` =  'products'
AND `foreign_key_column` =  'prod_id'
AND `foreign_key_value` =  '2319'
AND `kind` =  'image_600x600'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0002  

SELECT *
FROM (`media`)
WHERE `media`.`media_id` =  '1047' 
0.0001  

SELECT *
FROM (`mime_types`)
WHERE `mime_types`.`extension` =  'jpg' 
0.0001  

SELECT *
FROM (`media_metadata`)
WHERE `media_id` =  '1047' 
0.0002  

SELECT SQL_CALC_FOUND_ROWS media_id, position
FROM (`media`)
WHERE `foreign_key_table` =  'products'
AND `foreign_key_column` =  'prod_id'
AND `foreign_key_value` =  '2319'
AND `kind` =  'gallery_image'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0003  

SELECT *
FROM (`products`)
WHERE `avail_id` IN ('A', 'B', 'C', 'H') 
AND `parent_id` =  '2319'
AND `type_id` =  'V'
ORDER BY IF(position = 0, 1, 0) ASC , `position`, `title` 
0.0001  

SELECT `c`.`format_id`, `c`.`price`, `c`.`sale_price`
FROM (`products` AS c)
WHERE `c`.`prod_id` =  '2320'
LIMIT 1 
0.0004  

SELECT SQL_CALC_FOUND_ROWS media_id, position
FROM (`media`)
WHERE `foreign_key_table` =  'products'
AND `foreign_key_column` =  'prod_id'
AND `foreign_key_value` =  '2320'
AND `kind` =  'thumbnail'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0002  

SELECT `product_categories__products`.`cat_id`
FROM (`product_categories__products`)
JOIN `product_categories` ON `product_categories__products`.`cat_id` = `product_categories`.`cat_id`
WHERE `product_categories__products`.`prod_id` =  '2319'
AND `product_categories`.`parent_id` =  1
AND `product_categories__products`.`cat_id` NOT IN (1, 261)  
0.0006  

SELECT `cat_id` AS id, `parent_id` AS parent, `status_id`, `name`, `description`, `url_friendly`, `page_title`, `meta_keywords`, `meta_description`, `position`, `updated_at`
FROM (`product_categories`)
WHERE `cat_id` != 1
ORDER BY `parent_id`, IF(position = 0, 1, 0) ASC , `position`, `name` 
0.0003  

SELECT *
FROM (`product_categories`)
WHERE `status_id` =  'A'
AND `parent_id` =  1
AND `cat_id` NOT IN (1, 261) 
ORDER BY `name` 
0.0003  

SELECT *
FROM (`site_settings`)
WHERE `option_key` =  'announcement' 
  HTTP HEADERS  (Show)
  SESSION DATA  (Show)
  CONFIG VARIABLES  (Show)