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Merger Waves and Post-Transaction Performance

Merger Waves and Post-Transaction Performance PDF Author: Daniel Vogel
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Languages : en
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Book Description
This study investigates whether a significant difference in abnormal returns to shareholders of acquiring companies during and between merger waves exists. The study of 292 acquirers in very large U.S. domestic public transactions between 1990 and 2000 shows that abnormal returns are significantly lower in the merger wave than in periods of low mergers and acquisitions activity. This phenomenon holds true even when NASDAQ-listed companies are excluded and subsamples by method of payment compared. Stock paid transactions clearly perform worse than transactions paid with cash or a combination of payment methods. No significant difference has been found between the post-transaction abnormal returns of single acquirers and companies that make many acquisitions. Furthermore, it can be shown that over the two years following the transaction announcement, acquiring shareholders face ever decreasing abnormal returns raising the question as to whether the stock market is capable of fully assessing the possible gains and losses from those transactions at the time of the transaction announcement. Many behavioral theories are supported by the results of this study, while the neoclassical theory fails to explain the negative cumulative average abnormal returns and reverse trends observable after the transaction announcement.