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Valuations in Corporate Takeovers and Financial Constraints on Private Targets

  • Daniel Greene


I examine acquisitions of private firms by public acquirers to better understand the effects of financial constraints on the division of economic gains in takeovers. Empirical tests exploit interstate bank branching deregulation, which relaxes financial constraints on private firms and can strengthen their bargaining position in an acquisition. Using a proxy for the degree to which targets depend on acquirers for financing, I find that private targets depend less on acquirers as a result of interstate bank branching deregulation. Relaxing financial constraints on private targets leads to an increase in target valuation multiples and a decrease in acquirer wealth gains.


Corresponding author

* Greene,, College of Business, Clemson University.


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This paper is based on the first essay of my dissertation at the Robinson College of Business at Georgia State University. I am grateful for the guidance of my dissertation committee: Omesh Kini (chair), Mark Chen, Bob Comment, Vikram Nanda, and Chip Ryan. I also thank an anonymous referee, Anup Agrawal, Alex Butler, Espen Eckbo, Pete Eisemann, Rudi Fahlenbrach, Jayant Kale, Di Li, Brandon Lockhart, Paul Malatesta (the editor), Kevin Mullally, Ramana Nanda, Micah Officer, Jared Smith, Todd Stonitsch, Yuehua Tang, Anjan Thakor, Yuan Wang, Brian Wolfe, seminar participants at Clemson University, Georgia State University, Southern Illinois University, the University of Alabama, Wayne State University, and conference participants at the 2013 Northern Finance Association Annual Meeting in Quebec City for helpful comments. Robbie Allen, Zach Dunlap, and Lex Mayers provided excellent insight into practical aspects of private firm sales and the banking industry. I thank Phil Strahan for providing data on factors that predict state law changes. I am grateful for financial support from the Louis Samuel Brooke Jr. Scholarship, the Steve Smith Fellowship, and a Georgia State University Dissertation Grant. All errors are mine.



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