Hidden Values or Synergy Effects? What the Market Does Not See

Abstract

The subject of bid premiums for public buyouts has been researched repeatedly as the premium itself can be hard to fully derive and could greatly affect both the acquirer and other investors involved. This thesis examines whether certain predetermined factors in fact, can be seen to influence the bid premium, looking at the Swedish market during 2005-2020. The factors were chosen in accordance with previous research and the financial theory available on the subject. Out of the researched factors, three were found to notably influence the bid premium at a significance level of five percent. The main method of payment for the bid, in terms of cash or stock, showed that the bid premium was 22.1 percent greater when the acquirer used cash rather than shares. The acquirer’s ownership stake in the target company prior to the announcement of the bid, displayed that the bid premium was 18.3 percent lower if the acquirer had a toehold. Lastly, the factor ‘the industry in which the target company is active’ showed that companies in the high tech and healthcare sector had a substantially higher bid premium which was 26.1 percent greater and 29.8 percent greater respectively (using consumer as reference group).