Table 2

Average pre-bid runups (Runup)and post-announcement markups (Markup)for different samples of successful and unsuccessful mergers or tender offers of exchange-listed target firms, 1975-91. Runup is the cumulative abnormal return to the target's stock from day -42 to day -1 relative to the first bid. Markup is the cumulative abnormal return to the target's stock from the day of the first bid through delisting or 126 trading days after the first bid, whichever comes first. The remaining columns show the proportions of each sample in which the target firm is taken over (Success), or there is pre-bid news implying that a bid might be forthcoming (News), or the target firm has a poison pill in place (Pill), or there are multiple bidder auctions (Auctions), or the deal is a tender offer (Tender Offer), or the deal is a management buyout (MBOs), or there is an all-cash payment to target shareholders (Cash), or there is an all-equity payment to target shareholders (Equity), or the S.E.C. later accused someone of engaging in insider trading prior to the takeover (Insiders). The rows show different samples of the data based on the characteristics of the deal. The main sample excludes deals that took longer than one year to consummate and target firms whose equity value is small (below $10 million) or whose pre-runup stock price is low (below $2 per share). All of the following samples are subsets of the main sample.

ReturnsProportion of Sample
SampleSample Size, NRunup MarkupSuccessNews PillsAuctionsTender Offers MBOsCashEquityInsiders
All1,8140.1330.1010.7720.4430.1360.2070.3500.1120.6000.1720.079
Main1,5230.1330.1050.7710.4590.1500.2050.3700.1140.6110.1670.089
Successful1,1740.143*0.15810.4560.1400.1920.4510.1220.6360.1730.115
Unsuccessful3490.100*0.07400.4700.1860.2490.0970.0860.5270.1460
News6990.151*0.0790.76510.2390.2650.4180.1240.6240.1190.119
No News8240.118*0.1270.77500.0750.1540.3300.1040.6010.2080.063
Poison Pill2290.1190.176*0.7160.72910.3620.52000.0960.7030.0960.118
No Pill1,2940.1350.092*0.7810.41100.1770.3440.1170.5950.1790.083
Auction3120.1270.182*0.7210.5930.26610.5320.1030.670.0740.099
No Auction1,2110.1340.085*0.7840.4240.12100.3290.1160.5960.1910.086
Tender Offers5640.156*0.201*0.9400.5180.2110.29410.0820.8170.0140.140
Mergers9590.119*0.049*0.6720.4240.1150.15200.1320.490.2570.058
MBOs1730.105*0.0890.8270.5030.1270.1850.26610.7630.0120.110
Cash9310.1410.142*0.8020.4680.1730.2240.4950.142100.099
Equity2540.092*0.0770.7990.3270.0870.0910.0310.008010.047
Insiders1350.183*0.212*10.6150.2000.2300.5850.1410.6810.0891
No Insiders1,3880.128*0.095*0.7490.4440.1460.2020.3490.1110.6040.1740
By Year of the First Bid:
1975250.0870.1330.8000.16000.0800.3600.0400.5200.3200
1976430.1570.1560.9070.20900.1400.37200.5580.2560.023
1977680.229*0.1280.8530.20600.1620.2940.0440.5740.2500.015
1978870.199*0.021*0.7590.25300.1720.3560.0340.5860.1490.034
1979920.222*0.036*0.7170.30400.2070.3370.0330.5430.1410.022
1980920.1670.0730.7830.33700.1520.2720.0540.5540.2070.054
1981790.1170.182*0.8230.39200.2150.3540.0630.5570.2030.228
1982810.1450.175*0.8890.48100.1360.3090.1850.5800.1600.173
1983840.1190.0840.8930.52400.1670.2380.1900.5830.2260.131
19841010.1230.0650.8320.4550.0100.1880.4160.2180.6830.1290.109
19851230.1190.0820.8210.5280.0730.2110.3820.1790.6020.1380.228
19861600.103*0.1060.7250.4750.1940.2190.4500.1190.6750.1190.063
19871290.086*0.1080.7670.5350.2640.2560.4420.1630.6050.1550.062
19881650.1290.2100.7090.6360.4300.3450.4790.1450.6970.0910.042
19891140.0860.0400.6050.6670.3950.2370.3770.0880.6670.1400.053
1990500.0760.0690.7000.5000.5400.1000.2800.0600.6000.2600.180
1991300.1380.2370.6670.5000.3670.0330.1670.0330.4330.4000.033

Note: Average runups and markups that are different from the main sample mean at the 5% significance level are marked with an asterisk *.

© Copyright 1996, G. William Schwert
Return to Markup Pricing Page