Winner's Curse in Acquisitions (Academic Paper)

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McNair Project
Winner's Curse in Acquisitions (Academic Paper)
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Three Big Pulls

SDC Mergers & Acquisitions

Add the following (A=L+E):

TargetTotalAssets	real, TASS: Taget Financials: Total Assets
TargetTotalLiabilities	real,  TLIA: Total Liabilities Last Twelve Months ($ Mil) 
TargetCommonEquity	real, COMEQ: Target Financials: Common Equity

Also nice:

TargetNetSales	real,  SALES: Net Sales Last Twelve Months ($ Mil)
TargetNetSales2	real, ?
TargetBookValuePerShare	real, BV: Book Value per Share Last Twelve Months ($) 
TargetIntangibles	real, IASS: Intangible Assets Last Twelve Months 
TargetRAndD	real, RND1: Research & Development Expense 1 Year Prior ($ Mil)

Added just in case:

Sales
Net Assets
Book Value (Perhaps needed for Tobin's Q?)
Session Details
---------------
Request   Hits    Request Description
   0        -     DATABASES: Domestic Mergers, 1979-Present (MA, OMA)
   1        -     Date Announced: 1/1/1985 to 10/11/2016 (Custom) (Calendar)
   2    300351    Target Nation : US
   3    257921    Acquiror Nation : US
   4    127852    Acquiror Public Status : P
   5     98102    Target Public Status : V, P
   6     63725    Deal Status : C
   7     52739    Percent of Shares Owned after Transaction: 100 to 100
   8              Custom Report: SDC_MA_Oct10v2 (Columnar) - Save As:
                  E:\McNair\Projects\Winner's Curse\Data\SDC_MA_Oct10v2.txt

  Billing Ref # : 1960756
  Capture File  : riceuniv.1960756
  Session Name  : SDC_MA_Oct10v2.ssh
Variables Pulled:
-----------------
Date Announced
Date Effective
Target Name 
Target Industry Sector 
Target Nation
Acquiror Name 
Acquiror Industry Sector 
Acquiror Nation
Pc of Shares Acq
Pc Owned After Transaction
Value of Transaction mil
Enterprise Value mil
Equity Value mil
Acquiror CUSIP
Acquiror Immediate Parent CUSIP
Acquiror Ultimate Parent CUSIP
Target Immediate Parent CUSIP
Target Ultimate Parent CUSIP
Target CUSIP
Acquiror Primary Ticker Symbol
Acquiror Ultimate Parent Primary Ticker Symbol
Target Primary Ticker Symbol
Target Ultimate Parent Primary Ticker Symbol
Target Ultimate Parent Ticker Symbol
Acquiror Primary NAIC Code
Acquiror Ultimate Parent Primary NAIC Code
Target Primary NAIC Code
Target s Ultimate Parent Primary NAIC Code
Number of Bidders
Status 
Value Est 
Value Amended Flag
Date Announced is Estimated
Consideration Structure
Number of Considerations Offered
Number of Considerations Sought
Consid Structure Description
Pc of Cash
Pc of Other
Pc of Stock
Pc of Unknown
Acquiror Full Name 
Target Name 
Acquiror City 
Target City 
Acquiror Zip Code
Target Zip Code
Acquiror State
Target State
Deal Currency Code
Target Bankrupt
Challenged Deal
Debt Restructuring
RecapDefense  
Government Owned Involvement Flag
Joint Venture
Restructuring
Acquiror is a Leveraged Buyout Firm
LBO 
IPO FlagY N 
Target is a Leveraged Buyout Firm
Merger of Equals
Reverse Takeover
Deal Began as a Rumor
Acquiror is a White Knight
White Knight Defense
Back End Defense
FlipOver Defense
Voting Plan Defense
Poison Pill
Creeping Acquisition
Repurchase Defense
Pacman Defense
Lockup FlagY N 
Target Lockup
Greenmail
Asset Lockup
Scorched Earth Defense
SelfTender Defense
Stock Lockup
Defense
White Squire
Acquiror Includes Employees
Acquiror Includes an ESOP
Significant Family Ownership of Target
Acquiror Lockup
Financial Acquiror
2 Step Spinoff
Acquiror Includes Mgmt
Open Market Purchases
Proxy Fight
Purpose Code
Related Deals
Foreign Provider of Funds
Stock Swap
Asset Swap Flag
Sweep the Street
SelfTender
Tender Offer
Unsolicited
Acquiror TermFee 
Target TermFee 
Forced vote provisions FlagY N
Walkaway
Acquiror Ultimate Parent Street Address 1
Acquiror Ultimate Parent Street Address 2
Target Ultimate Parent Street Address 1
Target Ultimate Parent Street Address 2
Acquiror Primary Stock ExchangeName
Target Primary Stock ExchangeName

COMPUSTAT

Use Compustat Industrial Annual (annual data)

Criteria:
-----------------
1970-1 to 2015-11
GVKEY, Entire Dbase
tab delimited, date in ISO8661
Variables:
----------
GVKEY
CONM
TIC
CUSIP
EXCHG
FYR
CURNCD
FYEAR
AT
CEQ
INTAN
EBITDA
REVT
SALE
NAICSH
SICH
MKVALT
PRCC_F
C
INDL
FS
STD

Note: TobinsQ is Market over book so MKVALT/AT (also pulled common stock and price)

CRSP

Use CRSP Annual, Daily Stock File

Criteria:
-----------------
PERMNO, Entire Dbase
1980-01-01 to 2015-12-31
tab delimited, date in ISO8661
Variables:
----------
PERMNO
CUSIP
NCUSIP
COMNAM
TICKER
PERMCO
EXCHCD
SICCD
NAICS
PRIMEXCH
PRC
VOL
NUMTRD
RET
SHROUT
VWRETD
EWRETD


Governance Measures

Projects --> Winner's Curse --> Data

Open the GovernanceVARS.txt

These are

  • staggered boards
  • limits to shareholder bylaw amendments
  • limits to shareholder charter amendments
  • supermajority requirements for mergers
  • poison pills
  • golden parachutes

To do list

Processing the SDC data:

  • Find SIC codes concordance to get NAICS for old data
  • Acquirer publicly traded ( must be AMEX, NASDAQ, or NYSE)
  • Magic with CUSIPs : CUSIP is a nine digit number (possibly ten, ) Seven issuer, two issue, one check

CRSP processing notes:

  • Estimation window 250 days ending 30 days before the Acq. must be at least 50 continuous days before the 30 days window.
  • Returns and prices may contain codes. Import as var_char and reprocess?

Other notes:

Governance Variables

A list of governance variables can be found in: E:\McNair\Projects\Winner's Curse\Data\GovernanceVARS

Paper Discussion

Variables & Where to Find Them:

Variable Location
Actual Return CRSP
Abnormal Return CRSP
Average Return CRSP
Weighted Average Return CRSP
Cumulative Ab. Return CRSP
Boom SDC
Competition Compustat
Distance SDC + google maps
IT Fixed Effect SDC
Idiosyncratic Volatility CRSP (Calculated)
Industry Fixed Effect SDC
Momentum CRSP (Calculated)
Private Financial Data CRSP
Percent Cash SDC
Previous Acquisitions SDC
Sales Compustat
Tobin's Q Compustat
Turnover CRSP
VC Fixed Event SDC & VentureXpert
Governance Compustat
Friendly vs. Hostile SDC

Importing the CRSP data into the `winner' database (Amir)

Two important files:
Project --> Winner's Curse --> Data --> SQL --> CRSP_NOTES
Project --> Winner's Curse --> Data --> SQL --> CRSP_CODES

Data file is located in: E:\McNair\Projects\Winner's Curse\Data\CRSP-Oct10-c30cc89e52b70545-1.txt

Issue 1: The text file is 8 GB large and there's no way to open it in Textpad. I'll try to read the file in LogExpert which seems to do a neat job in in opening large files. Otherwise, I'll try to read the first few lines in the terminal. Update: I managed to open the file in LogExpert. However, extremely inefficient to scroll over the file.

I copied the file to Z:\WinnersCurse\CRSP-oct10

Entered the following command in the terminal to read the header:

head -1 CRSP-oct10.txt
CREATE TABLE CRSP (
 PermNo int,
 date date,
 EXcode int,
 SIC int,
 NCUSIP varchar(10),
 Ticker varchar(10), 
 Name varchar(100),
 NAICS int,
 PrimEx varchar(1),
 PERMCO int, 
 CUSIP varchar(12),
 Price real,
 VOL int,
 RET real,
 ShOut int, 
 trade int, 
 EQRET real,
 VRET real
);
 
 

We have unexpected data types in few columns. We'll first start by copying data into a table named CRSPtmp with varchar type for most of the fields.

CREATE TABLE CRSPtmp (
 PermNo varchar(10),
 date date,
 EXcode varchar(10),
 SIC varchar(10),
 NCUSIP varchar(10),
 Ticker varchar(10), 
 Name varchar(100),
 NAICS varchar(10),
 PrimEx varchar(1),
 PERMCO varchar(10), 
 CUSIP varchar(12),
 Price varchar(15),
 VOL varchar(10),
 RET varchar(10),
 ShOut varchar(10), 
 trade varchar(10), 
 EQRET varchar(10),
 VRET varchar(10)
);
 
\COPY crsptmp FROM '/bulk/WinnersCurse/CRSP-oct10.txt' WITH DELIMITER AS E'\t' HEADER NULL AS  CSV
-- COPY 64614281

Next, to create an index on CUSIP:

CREATE INDEX CUSIPIndex
ON crspfinal(CUSIP);

CRSP2 Variable Issues (Jake)

permno-

date-

excode -

sic - letter "Z", value 711 (most are 4 digits),

ncusip -

ticker -

name -

naics -

primex -

permco -

cusip -

Price - Null values, negative numbers,

vol - null values

ret - null values, letter "B" as value multiple times, letter "C",

shout - null values

trade - null values

eqret -

vret -

Importing SDC Data into Winner Database

Session Details
---------------
Request   Hits    Request Description
  0        -     DATABASES: Domestic Mergers, 1979-Present (MA, OMA)
  1        -     Date Announced: 1/1/1985 to 10/11/2016 (Custom) (Calendar)
  2    300400    Target Nation : US
  3    257952    Acquiror Nation : US
  4    127865    Acquiror Public Status : P
  5     98108    Target Public Status : V, P
  6     63732    Deal Status : C
  7     52746    Percent of Shares Owned after Transaction: 100 to 100
  8              Custom Report: SDC_MA_Oct10v4 (Columnar) - Save As:
                 E:\McNair\Projects\Winner's Curse\Data\SDC_MA_Oct10v4.txt
 Billing Ref # : 1962461
 Capture File  : riceuniv.1962461
 Session Name  : SDC_MA_Oct10v4.ssh

We encountered an issue with the variable Purpose Code in our most recent SDC pull. Purpose Code can carry multiple values, so we had extra lines with blanks for every value other than Purpose Code. Rather than doing another SDC pull, we used the following regular expressions to solve:

Find : ^[\s}.* 
Replace : 

Directly below is the original SDC file prior to our fix

E:\McNair\Projects\Winner's Curse\Data\SDC_MA_Oct10v4 -raw

Directly below is the SDC file post-fix

E:\McNair\Projects\Winner's Curse\Data\SDC_MA_Oct10v4


11332 rows were removed as a result of our regular expression use.

Normalizing SDC data

A copy of the normalizer is save here

E:\McNair\Projects\Winner's Curse\Data\NormalizeFixedWidth.pl

Follow these steps:

  1. Activate the Komodo license.
  2. Open Komodo IDE 9, there should be a shortcut on your desktop
  3. Drag and drop NormalizeFixedWidth.pl in Komdo
  4. Click on the start or continue debugging
  5. Type : '-file=SDC_MA_Oct10v3.txt

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