THE SUCCESS OF ACQUISITIONS - EVIDENCE FROM DIVESTITURES

This paper studies a sample of large acquisitions completed between 19 71 and 1982. By the end of 1989, acquirers have divested almost 44% of the target companies. We characterize the ex post success of the dive sted acquisitions and consider 34% to 50% of classified divestitures a s unsuccessful. Acquirer returns and total (acquirer and target) retur ns at the acquisition announcement are significantly lower for unsucce ssful divestitures than for successful divestitures and acquisitions n ot divested. Although diversifying acquisitions are almost four times more likely to be divested than related acquisitions, we do not find s trong evidence that diversifying acquisitions are less successful than related ones.