Do Australian firms engaging in mergers and acquisitions experience performance improvements?
(2010)Department of Business Administration
- Abstract
- Purpose: To determine if mergers and acquisitions are value creating or destroying in the Australian market, identifying the individual sources of this value creation or destruction, and attempt to relate the post-merger performance to changes in equity prices around the announcement date of the bid.
Methodology: A quantitative approach comparing pre and post merger firm performance with a median and regression based analysis. An equity market event window study is also conducted by using a regression to calculate market model parameters and then measuring abnormal equity returns around the announcement date.
Theoretical perspective: Mergers are motivated by the possibility of operating and financial synergies, which result in economic... (More) - Purpose: To determine if mergers and acquisitions are value creating or destroying in the Australian market, identifying the individual sources of this value creation or destruction, and attempt to relate the post-merger performance to changes in equity prices around the announcement date of the bid.
Methodology: A quantitative approach comparing pre and post merger firm performance with a median and regression based analysis. An equity market event window study is also conducted by using a regression to calculate market model parameters and then measuring abnormal equity returns around the announcement date.
Theoretical perspective: Mergers are motivated by the possibility of operating and financial synergies, which result in economic value creation. The market is efficient and the equity re-evaluation of the bidder and target firms at the announcement of the merger reflects the expected economic value creation from the merger. Empirical foundation: A study of mergers and acquisitions during the period 1997-2006 has been empirically studied to obtain the data needed.
Conclusions: Firms that engage in mergers and acquisitions experience significant improvements in operating performance and profitability following the merger. Operating synergies exist in the form of an improvement in the operating expense ratio. Financial synergies exist in the form of a lower cost of debt and expanded debt capacity. We find evidence that merging firms increase their level of capital expenditure post-merger, which is related to the post-merger performance improvements. Further, we find positive abnormal equity returns for target firms at the announcement of the merger, and a relationship between combined bidder and target abnormal returns and the post-merger performance improvements. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1625339
- author
- Bellingham, David and Cooper, Jarrad
- supervisor
- organization
- year
- 2010
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Synergies, Mergers and Acquisitions, Australia, Announcement Effect, Post-merger, Operating performance, Value Creation., Management of enterprises, Företagsledning, management
- language
- Swedish
- id
- 1625339
- date added to LUP
- 2010-06-07 00:00:00
- date last changed
- 2012-04-02 18:07:44
@misc{1625339,
abstract = {{Purpose: To determine if mergers and acquisitions are value creating or destroying in the Australian market, identifying the individual sources of this value creation or destruction, and attempt to relate the post-merger performance to changes in equity prices around the announcement date of the bid.
Methodology: A quantitative approach comparing pre and post merger firm performance with a median and regression based analysis. An equity market event window study is also conducted by using a regression to calculate market model parameters and then measuring abnormal equity returns around the announcement date.
Theoretical perspective: Mergers are motivated by the possibility of operating and financial synergies, which result in economic value creation. The market is efficient and the equity re-evaluation of the bidder and target firms at the announcement of the merger reflects the expected economic value creation from the merger. Empirical foundation: A study of mergers and acquisitions during the period 1997-2006 has been empirically studied to obtain the data needed.
Conclusions: Firms that engage in mergers and acquisitions experience significant improvements in operating performance and profitability following the merger. Operating synergies exist in the form of an improvement in the operating expense ratio. Financial synergies exist in the form of a lower cost of debt and expanded debt capacity. We find evidence that merging firms increase their level of capital expenditure post-merger, which is related to the post-merger performance improvements. Further, we find positive abnormal equity returns for target firms at the announcement of the merger, and a relationship between combined bidder and target abnormal returns and the post-merger performance improvements.}},
author = {{Bellingham, David and Cooper, Jarrad}},
language = {{swe}},
note = {{Student Paper}},
title = {{Do Australian firms engaging in mergers and acquisitions experience performance improvements?}},
year = {{2010}},
}