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 tak e-over market remains largely unexplored. In analysing the unique features of private target take-overs, we compare the mergers and acquisitions marke ts for unquoted and quoted firms on several dimensions including methods of payment, offer premiums and bidder wealth effects. Our results show that t hese mergers provide positive shareholder wealth benefits for bidders and r elatively high premiums for privately held targets. Also, the market's reac tion depends on whether it perceives the price paid for the target as too h igh or too low, a rational response given the sentiment at the time of the announcement.