Bidder Returns: A Study on Share Price Reactions Following Takeover Announcements 2000 – 2006

Abstract: This Master's Thesis set out to investigate how bidder returns are dispersed in 113 acquisitions made by Swedish companies between the years 2000 and 2006, and if this dispersion can be explained with five explanatory variables. The investigated variables are; bidder acquisition experience, owner control in the bidding company, domestic or cross border acquisitions, industry similarity between the bidder and target, and the relative size of the target. This study is performed by measuring the short-term abnormal share price reaction for the acquirer. We observe that bidder returns are substantially dispersed around a slightly positive mean of 1.89 per cent. Furthermore, we find that bidder acquisition experience, relative size of the target, owner control, conglomerate acquisitions, and international acquisitions have a positive effect on the return that the bidder realizes. While vertical acquisitions affect bidder returns negative. However, our estimated model explains 10 per cent of the variation in bidder return, indicating that there are other variables that have an effect on bidder returns.