Reversions of Excess Pension Assets After Takeovers

This paper evaluates pension asset revisions as a source of takeover gains. Within two years following a hostile takeover, pension funds were reverted by 15.1 percent of the firms. The corresponding number is only 8.4 percent of the time in friendly takeovers. This result is consistent with the view that hostile takeovers breach implicit contracts between firms and employees. We estimate that the reversions can on average explain 10 to 13 percentage of the takeover premium in cases where they actually occur. Reversions are too small to be the sole, or even dominant, source of takeover gains. 

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