Financial buyers in takeovers: Focus on cost efficiency

Halina Frydman, Roman Frydman, Susanne Trimbath

    Research output: Contribution to journalArticlepeer-review

    Abstract

    This paper examines whether financial buyers are more likely to initiate takeovers of inefficient firms. We show that they indeed are and thus conclude that takeovers by financial buyers play a potentially beneficial role in the allocation of corporate assets in the U.S. economy. Our analysis of determinants of takeovers initiated by financial buyers uses an application of the methodology developed in Trimbath, Frydman and Frydman (2001). In order to illustrate efficiency enhancements introduced by financial buyers, we select Forstmann Little’s acquisition of General Instrument for a brief case study. We show that their aggressive programs of cost management substantially improved the efficiency of General Instrument. Moreover, it allowed General Instrument to expand research and development to become the global leader in high definition television.

    Original languageEnglish (US)
    Pages (from-to)2-13
    Number of pages12
    JournalManagerial Finance
    Volume28
    Issue number12
    DOIs
    StatePublished - 2002

    Keywords

    • Acquisitions
    • C2-Econometric methods
    • Corporate finance and governance
    • G24
    • G3
    • G34
    • Investment banking
    • Mergers

    ASJC Scopus subject areas

    • Business, Management and Accounting (miscellaneous)
    • Finance

    Fingerprint Dive into the research topics of 'Financial buyers in takeovers: Focus on cost efficiency'. Together they form a unique fingerprint.

    Cite this