How do acquirers bid? Evidence from serial acquisitions in China

This study explores the anchoring effect of previous bid premiums on acquirers' bidding behavior in serial acquisitions. We demonstrate that, after controlling for deal, target, as well as acquirer characteristics, learning, and unobserved confounding factors, the current bid premium is positively correlated with the acquirer's previous bid premium. The strength of this anchoring effect diminishes with longer time intervals between acquisitions and increases with the industry similarity of targets and acquisition frequency. Notably, it remains unaffected by the acquirer's state ownership. Additionally, the anchoring effect is less pronounced during periods of high economic uncertainty and can reverse following a change in the acquirer's CEO. Our findings suggest that serial acquisitions are interrelated events, challenging the notion that each bid is an isolated occurrence. This research provides insights into the underperformance of serial acquirers compared to single acquirers and the declining trend in announcement returns across successive deals.