The Market for Corporate Control: The Empirical Evidence Since 1980

C orporate takeovers have been very big business in the 1980s. The Office of the Chief Economist (OCE) of the Securities and Exchange Commission estimates that shareholders of target firms in successful tender offers from 1981 through 1986 received payments in excess of $54 billion over the value of their holdings before the tender offers. Almost $38 billion of the total was received after 1984. If we include the increased wealth of target firm shareholders resulting from leveraged buyouts, mergers, and corporate restructurings (prompted in large part by the threat of takeovers) these numbers are even larger. W. T. Grimm & Co. collects similar data for a larger sample of change-of-control transactions, including mergers and leveraged buyouts. They estimate that from 1981 to 1986 the total dollar value of the premiums over the pre-announcement price paid for securities involved in change-of-control transactions was $118.4 billion.1 Corporate restructurings have created even more