Corporate real estate's impact on the takeover market

This article explores the issues and problems associated with corporate real estate ownership as viewed through the takeover market. The perception held by managers is that corporate real estate assets are unique, specialized assets. This perception conflicts with financial theory which states that the market values all corporate assets based only on their expected future cash flows. Thus corporate real estate assets are priced according to their cash flows and are like other corporate assets. This study tests the hypothesis that corporate real estate is a specialized asset by examining the impact real estate assets have on the takeover market. The study uses a logit regression model in order to attempt to predict which firms become takeover targets. If corporate real estate in general is a specialized asset, then real estate is expected to be an important variable in predicting takeover targets. Although the logit model has little predictive accuracy, results from the prediction model suggest that corporate real estate plays a significant part in determining the likelihood of a firm's becoming a takeover target. The greater the real estate holdings, the greater the likelihood of a firm's becoming a takeover target.

[1]  Eric Sorensen,et al.  An application of logit analysis to prediction of merger targets , 1984 .

[2]  Robert F. Bruner,et al.  The Use of Excess Cash and Debt Capacity as a Motive for Merger , 1988, Journal of Financial and Quantitative Analysis.

[3]  M. Maloney,et al.  Excess Capacity, Cyclical Production, and Merger Motives: Some Evidence from the Capital Markets , 1988, The Journal of Law and Economics.

[4]  Hugh O. Nourse,et al.  The Impact of Corporate Real Estate Unit Formation on the Parent Firm's Value , 1988 .

[5]  Ralph A. Walkling,et al.  Agency Theory, Managerial Welfare, and Takeover Bid Resistance , 1984 .

[6]  E. Ziegel.  Introduction to the Theory and Practice of Econometrics , 1989 .

[7]  Michael Bradley,et al.  Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms , 1988 .

[8]  R. Heinkel,et al.  A Model of Dynamic Takeover Behavior , 1986 .

[9]  J. Rosenfeld.  Additional Evidence on the Relation between Divestiture Announcements and Shareholder Wealth , 1984 .

[10]  Sanford J. Grossman,et al.  The Allocational Role of Takeover Bids in Situations of Asymmetric Information , 1981 .

[11]  Peter R. Dodd,et al.  Merger proposals, management discretion and stockholder wealth , 1980 .

[12]  Richard S. Ruback,et al.  The Market for Corporate Control: The Scientific Evidence , 2002 .

[13]  James Owers,et al.  The Separation of Real Estate Operations By Spin-Off , 1984 .

[14]  Michael Bradley,et al.  THE RATIONALE BEHIND INTERFIRM TENDER OFFERS Information or Synergy , 1983 .

[15]  James Owers,et al.  The market for interfirm asset sales:Partial sell-offs and total liquidations , 1987 .

[16]  Carla K. Hayn.  Tax attributes as determinants of shareholder gains in corporate acquisitions , 1989 .

[17]  Prem C. Jain.  The Effect of Voluntary Sell-off Announcements on Shareholder Wealth , 1985 .

[18]  P. G. Benson,et al.  Investigating the Valuation Effects of Announcements of Voluntary Corporate Selloffs , 1984 .

[19]  S. J. Press,et al.  Applied multivariate analysis : using Bayesian and frequentist methods of inference , 1984 .

[20]  Sanford J. Grossman,et al.  The free-rider problem and the theory of the corporation , 1980 .

[21]  J. Zaima,et al.  THE WEALTH EFFECTS OF VOLUNTARY SELLOFFS: IMPLICATIONS FOR DIVESTING AND ACQUIRING FIRMS , 1985 .

[22]  Teresa A. John.  Mergers and Investment Incentives , 1986, Journal of Financial and Quantitative Analysis.

[23]  Jerold B. Warner,et al.  The Distribution of Power Among Corporate Managers, Shareholders, and Directors , 1988 .

[24]  H. Manne,et al.  Mergers and the Market for Corporate Control , 1965, Journal of Political Economy.

[25]  Krishna G. Palepu,et al.  Predicting takeover targets: A methodological and empirical analysis , 1986 .

[26]  Michael Bradley,et al.  Interfirm Tender Offers and the Market for Corporate Control , 1980 .

[27]  V. Barnett,et al.  Applied Linear Statistical Models , 1975 .

[28]  Ralph A. Walkling,et al.  Predicting Tender Offer Success: A Logistic Analysis , 1985, Journal of Financial and Quantitative Analysis.