The take-over market for privately held companies: the US experience

The volume of acquisitions involving privately held firms has far surpassed that of publicly traded firms in recent years; yet this segment of the take‐over market remains largely unexplored. In analysing the unique features of private target take‐overs, we compare the mergers and acquisitions markets for unquoted and quoted firms on several dimensions including methods of payment, offer premiums and bidder wealth effects. Our results show that these mergers provide positive shareholder wealth benefits for bidders and relatively high premiums for privately held targets. Also, the market's reaction depends on whether it perceives the price paid for the target as too high or too low, a rational response given the sentiment at the time of the announcement.