We conduct an out-of-sample test of the relation between acquisition return and governance indices for the extended period of 1996-2006. The negative relation between governance indices and acquisition performance disappeared in the post-SOX period. Further analysis shows that antitakeover provisions hurt firm value only when acquirers hold excess cash and external governance is weak. The presence of the interactive effect suggests that the wealth effect of takeover defenses is neutral. In addition, we find that strong external governance promotes firms to abolish some governance provisions and classified boards in particular. This partial elimination of governance provisions reflects a tradeoff between benefits and costs of governance provisions.