Clark, Kent and Eli Ofek, "Mergers as a Means of Restructuring Distressed Firms: An Empirical Investigation", Journal of Financial and Quantitative Analysis, Vol. 29, No. 4, (December 1994), pp. 541-565.
Abstract: We examine 38 takeovers of distressed firms and find that these takeovers are more likely to involve firms in the same industry and less likely to be hostile takeovers than are acquisitions in general. We use five different measures to evaluate post-merger performance of the combined bidder and target firms. All performance measures suggest that bidders are unable to successfully restructure targets. The market demonstrates an ability to forecast the success of restructuring. Restructuring success is negatively related to the size of premium paid by the bidder for the target and positively related to the financial distress of the target.