Deal Premiums in M&A: the Role of Aggregate Funding Conditions and Target Operational Performance
(2025) BUSN79 20251Department of Business Administration
- Abstract
- Seminar Date: 2025-06-02
Course: BUSN79, Degree Project in Accounting and Finance
Supervisor & Examiner: Diem Nguyen & Reda Moursli
Authors: Märta Eklöf & Ebba Svensson
Five Key Words: M&A Deal Premium, Aggregate Funding Conditions, Target Operational Performance, Financial Constraints, Bargaining Power
Purpose: The purpose of this study is to test whether aggregate funding conditions during deal negotiations and target operational performance one year prior M&A announcement impact M&A deal premium. It will further be tested if the effect of target operational performance on deal premiums vary under different funding conditions.
Methodology: The economic approach used is OLS regressions on cross-sectional data. The... (More) - Seminar Date: 2025-06-02
Course: BUSN79, Degree Project in Accounting and Finance
Supervisor & Examiner: Diem Nguyen & Reda Moursli
Authors: Märta Eklöf & Ebba Svensson
Five Key Words: M&A Deal Premium, Aggregate Funding Conditions, Target Operational Performance, Financial Constraints, Bargaining Power
Purpose: The purpose of this study is to test whether aggregate funding conditions during deal negotiations and target operational performance one year prior M&A announcement impact M&A deal premium. It will further be tested if the effect of target operational performance on deal premiums vary under different funding conditions.
Methodology: The economic approach used is OLS regressions on cross-sectional data. The dependent variable used is four week M&A deal premium with funding environment nine months prior M&A announcement and three proxies for target operational performance as main explanatory variables. Further target-, bidder- and deal controls will be introduced with additional controls for target- and bidder sector and year effects.
Theoretical perspectives: The theoretical frameworks used in this paper are Agency Costs, Free Cash Flow-theory, Capital Rationing Theory, Bargaining Power and Rational and Behavioral Theory. Further theoretical reasoning related to M&A deal premiums will be adopted.
Empirical foundation: The sample consists of 594 completed M&A deals announced between 2012-2024 on the American market including 592 public targets and 450 public bidders.
Conclusions: The primary takeaways from this paper is that aggregate funding conditions are not significantly proven to impact the size or direction of deal premiums. Target operational performance is partly proven to impact deal premiums with two out of three measurements being significant and negatively correlated with deal premiums. Furthermore, when introducing the partial effect of target operational performance on deal premiums under varying funding conditions, target asset turnover was found to increase deal premiums significantly in more favorable funding conditions. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9208071
- author
- Eklöf, Märta LU and Svensson, Ebba LU
- supervisor
-
- Diem Nguyen LU
- organization
- course
- BUSN79 20251
- year
- 2025
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- M&A Deal Premium, Aggregate Funding Conditions, Target Operational Performance, Financial Constraints, Bargaining Power
- language
- English
- id
- 9208071
- date added to LUP
- 2025-07-04 09:12:31
- date last changed
- 2025-07-04 09:12:31
@misc{9208071,
abstract = {{Seminar Date: 2025-06-02
Course: BUSN79, Degree Project in Accounting and Finance
Supervisor & Examiner: Diem Nguyen & Reda Moursli
Authors: Märta Eklöf & Ebba Svensson
Five Key Words: M&A Deal Premium, Aggregate Funding Conditions, Target Operational Performance, Financial Constraints, Bargaining Power
Purpose: The purpose of this study is to test whether aggregate funding conditions during deal negotiations and target operational performance one year prior M&A announcement impact M&A deal premium. It will further be tested if the effect of target operational performance on deal premiums vary under different funding conditions.
Methodology: The economic approach used is OLS regressions on cross-sectional data. The dependent variable used is four week M&A deal premium with funding environment nine months prior M&A announcement and three proxies for target operational performance as main explanatory variables. Further target-, bidder- and deal controls will be introduced with additional controls for target- and bidder sector and year effects.
Theoretical perspectives: The theoretical frameworks used in this paper are Agency Costs, Free Cash Flow-theory, Capital Rationing Theory, Bargaining Power and Rational and Behavioral Theory. Further theoretical reasoning related to M&A deal premiums will be adopted.
Empirical foundation: The sample consists of 594 completed M&A deals announced between 2012-2024 on the American market including 592 public targets and 450 public bidders.
Conclusions: The primary takeaways from this paper is that aggregate funding conditions are not significantly proven to impact the size or direction of deal premiums. Target operational performance is partly proven to impact deal premiums with two out of three measurements being significant and negatively correlated with deal premiums. Furthermore, when introducing the partial effect of target operational performance on deal premiums under varying funding conditions, target asset turnover was found to increase deal premiums significantly in more favorable funding conditions.}},
author = {{Eklöf, Märta and Svensson, Ebba}},
language = {{eng}},
note = {{Student Paper}},
title = {{Deal Premiums in M&A: the Role of Aggregate Funding Conditions and Target Operational Performance}},
year = {{2025}},
}