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Cornell Hospitality Analysis Finds Takeovers Aimed at Large Hotel Operators and Small REITs
The hotel merger and acquisition targets were most likely to be either a large hotel company or a relatively small real estate investment trust (REIT), Ma and Liu found. Both are assistant professors at the Cornell School of Hotel Administration. Other takeover targets tended to have a high percentage of fixed assets and a low level of debt, and displayed a mismatch between growth prospects and available resources.
Liu suggested that further research is needed to determine exactly why deal makers preferred large operators and small REITs. "One clue from other research is that REITs are more transparent in financial management, as tax regulations require that REITs must pay out 90 percent of their taxable income as dividends and maintain 75 percent of their income and assets in real estate related activities," he said. "It may be that these special tax regulations make the REITs particularly attractive, so that they behave differently from hotel operating companies."
Ma and Liu add that the availability of credit will eventually return, and they believe that their hospitality analysis will be useful both for lodging company owners and investors who wish to attract an acquisition, and for those who want to make their firm unattractive to potential takeovers.
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