Takeovers : The Controversy and the Evidence

The market far corporate control that has arisen in the last two decades isgenerating large benefits for shareholders and for the economy as a whole. The corporatecontrol market generates these gains by loosening control over vast amounts of resourcesand making it possible for those resources to move more quickly to their highest-valueduse. This occurs through: takeovers, both hostile and friendly; divestitures; spinoffs;liquidations; leveraged buyouts; and going private transactions.We are seeing a normal healthy market in operation, both on the takeover side andon the divestiture side. The total benefits have been huge as reflected in gains of 535billion to stockholders of acquiring and acquired firms in approximately the 50 largesttakeovers in the last four years. Since takeovers are investments taken under greatuncertainty, it is not surprising that, as in every investment activity, not all ventures aresuccessful. Those who criticize takeovers and mergers by pointing to those thatfail are missing the point. On average, takeovers create value through increasedefficiencies of various types