Control Premiums and Strategic Mergers, 1989 to 2002

Acquisition premiums from 1989 to 2002 contradict the theory that control premiums are generated by the synergy of strategic mergers. Data from 3370 acquisitions show that control premiums are unrelated to the strategic nature of the merger (as determined by a comparison of four digit SIC codes). For example, the group of mergers between two companies with the same four digit SIC codes have the lowest average control premium of any group. Furthermore, a review of acquisition premiums for partial interests in the target companies reveals a rising control premium that is directly related to the share of the target company acquired.