Are Third-Party Fundamental Valuations Relevant in Public Company Takeovers?

• 成果类型: Article
• 署名作者: Shaffer, Matthew
• 署名单位: University of Southern California
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4959
• 发表日期: 2024
• 页码: 6356-6373
• 关键词: fairness opinions; valuation; corporate governance; M&A

摘要

In U.S. mergers and acquisitions, target directors are required to consider thirdparty financial valuations, summarized in a fairness opinion before accepting a takeover offer. Critics argue (1) that these valuations are not relevant for public companies, which can assess the desirability of the deal based on the market premium, and (2) that the investment bank providers cater to management by rationalizing the deal price rather than providing an independent valuation check. I find that fairness valuations can provide valid information about the target's value, incremental to its predeal stock price. They can impound expected transaction synergies, unravel rumor-driven stock price runups, and may signal ex ante fundamental mispricing. I also find evidence of the alleged catering, which I distinguish from legitimate valuation disagreements. This suggests that thirdparty fundamental valuation could play a useful role in the governance of public company takeovers, but there are flaws in its current implementation.