The Free Cash Flow Theory of Takeovers: A Financial Perspective on Mergers and Acquisitions and the Economy

@inproceedings{Jensen2003TheFC,
  title={The Free Cash Flow Theory of Takeovers: A Financial Perspective on Mergers and Acquisitions and the Economy},
  author={Michael C. Jensen},
  year={2003}
}
Through dozens of studies, economists have accumulated considerable evidence and knowledge on the effects of the takeover market. Most of the earlier work is well summarized elsewhere (Jensen and Ruback (1983); Jensen (1984); Jarrell, Brickley and Netter (1988)). Here, I focus on current aspects of the controversy. In brief, the previous work tells us the following: • Takeovers benefit shareholders of target companies. Premiums in hostile offers historically exceed 30 percent on average, and in… CONTINUE READING

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