Dickerson, Andrew P. Gibson, Heather D. Tsakalotos, Euclid
Year of Publication:
Department of Economics Discussion Paper No. 9907
University of Kent, Department of Economics, Canterbury
The primary purpose of this paper is to investigate whether companies can use acquisition as a strategy to reduce their probability of takeover. A subsidiary issue is whether such a strategy has any impact on their subsequent probability of bankruptcy. The determinants of making an acquisition, being taken over, and bankruptcy are modelled within a competing risks framework using two large samples of UK manufacturing companies. Our results indicate that, ceteris paribus, companies which make acquisitions can significantly reduce their conditional probability of being taken over, largely through the impact that acquisition has on corporate size. In this sense, attack, through acquisition, is the best form of defence, against takeover.