A critical evaluation of an article for Corporate Restructuring - Essay Example

A critical evaluation of an article Are Friendly Acquisitions Too Bad for Shareholders and Managers? Long-Term Value Creation and Top Management Turnover in Hostile and Friendly Acquirers. This research article authored by Sudi Sudarsanam and Ashraf A.Mahate inquiring into value creation during the post acquisition period proceeds with the following research questions/hypotheses with the findings further below.1) Whether the acquiring firm through single bidder acquisition gain more value creation than an acquiring firm through multi-bidder auction.

(auction effect)2) Whether a hostile acquirer firm gains more wealth creation than friendly acquiring firm.3) Whether white knight acquirer firm gains more wealth creation than non-white acquiring firm. Main findingsFrom the sample of 519 acquisitions of UK firms during the period from 1983-1995, it has been found by hostile acquirers experienced more wealth creation in the long run post acquisition than friendly acquiring firm. The rationale behind this conclusion confirmed through robust statistical testing is that a hostile acquired firm which was under performing is bound to perform better post acquisition through better management and deployment of resources which might have been wanting prior to the acquisition.

On the other hand an acquisition without resistance as a friendly acquisition is bound to experience lesser value creation post acquisition as the friendly firm already doing well and selling itself at a premium would leave further scope value creation in the long run. In fact, it can be value destroying. The recommendation of the study is that there should be no regulatory ban on hostile takeovers. Limitations : Hostile takeover as means of higher value creation has not been fully recognized. In the U.S.

, law is in favor of incumbent management and against hostile takeovers (Sudarsanam & Mahate, 2006), (He & Wang, 2013). Reference He, R., & Wang, T. (2013). Similar Technology, Complementary Technology and Long-term Shareholder Value of Acquiring Firm in Technology Acquisitions: Evidence from High-tech Industries in China. Information Technology Journal , 12, 1932-1940.Sudarsanam, S., & Mahate, A. A. (2006). Are Friendly Acquisitions Too Bad for Shareholders and Managers? Long-Term Value Creation and Top Management Turnover in Hostile and Friendly Acquirers.

British Journal of Management , 17, S7-S30.