Face-to-Face Interactions and the Returns to Acquisitions: Evidence from Smartphone Geolocational Data

We examine the effect of pre-announcement interactions between acquirers and targets on the returns to acquirers. We argue that frequent interactions with the target before the acquisition can benefit the acquirer by mitigating competition in the bidding process through the increase of the target’s preference for the focal acquirer and informational advantages over other bidders. For a sample of U.S. domestic acquisitions, we use smartphone geolocational data to measure the movement of people between merging companies’ headquarters in the months before the acquisition announcement. We find that more intense interactions increase the abnormal returns on the acquirer’s stock at the announcement. In acquisitions of public targets, more interactions increase the fraction of value appropriated by the acquirer (reducing the acquisition premium), but do not affect the total value created by the acquisition. When frequent interactions occur, other bidders are less likely to bid for the target after the focal acquisition is announced.

Zoom link: https://eur-nl.zoom.us/j/98236707736?pwd=dE1TT0pzUXR3dU41ZWJNaHBpeXU1dz09