Bidder Excess Control, Private Benefits and Acquisition Premium: Evidence from France

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This article investigates the effect of French acquirer’s control on acquisition premiums. Using a sample of 169 transactions initiated by French listed companies during a sample period of 2000-2015, we examine the effects of controlling shareholder entrenchment on acquisition premium. Our findings reveal, first, a positive relation between the control–ownership wedge of the ultimate controlling shareholder and target overpayment, second, a negative impact of the presence of other large shareholders on target overpayment. Thus, we show that ultimate shareholders owning an excess of voting rights use to overpay for targets when they control more than 20% of French bidders. The other large shareholders play a crucial monitoring governance role by discouraging ultimate owner to overpay for targets. Academic literature show that premium can reflect private benefits of control in private block transactions; we argue that acquisition premium can reflect private benefits even in public transactions.

Author(s):

Mohamed-Firas Thraya    
IDRAC BUSINESS SCHOOL
France

Taher Hamza    
VALLOREM Lab, Université d’Orléans, France
Tunisia