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Stock Market Reactions and Synergy Realization from M&A’s - A Comparison between Event Study and Case Survey Results

Ericson Thordenberg, Jacob and Helgesson, Gustav (2010)
Department of Business Administration
Abstract
By using a set of firms engaged in merger activities, the aim of this thesis is to evaluate whether the stock markets were able to foresee synergy realization correctly in our specific companies. If markets show a tendency to over-/underestimate synergies, we find it interesting to investigate further why that is. A triangulation methodology, where the authors use more than one methodological approach, will be utilized in this thesis. Triangulation is defined as the combination of methodologies to studying the same phenomenon. We elaborate around a subsample from the case survey by Finkelstein and Larsson (1999) and apply both qualitative- and quantitative like approaches Prior research results from the case survey conducted by Larsson and... (More)
By using a set of firms engaged in merger activities, the aim of this thesis is to evaluate whether the stock markets were able to foresee synergy realization correctly in our specific companies. If markets show a tendency to over-/underestimate synergies, we find it interesting to investigate further why that is. A triangulation methodology, where the authors use more than one methodological approach, will be utilized in this thesis. Triangulation is defined as the combination of methodologies to studying the same phenomenon. We elaborate around a subsample from the case survey by Finkelstein and Larsson (1999) and apply both qualitative- and quantitative like approaches Prior research results from the case survey conducted by Larsson and Finkelstein will be used as an empirical foundation for synergy realization results. The deals included in our subsample from their study are defined as either successful or unsuccessful deals in terms of synergy realization. Additionally a short-term event study is undertaken in order to investigate if these deals experienced any abnormal returns deals using the market model. Our study found that all the acquiring companies in our sample gained abnormal returns in various event windows. This differ from the work by Bruner (2001) where he summarized the result from 130 different studies. He found that shareholders of the acquiring firms generally gained zero return. Seemingly, the stock markets failed to correctly anticipate the outcome for the companies classified as unsuccessful in terms of synergy realization. The reasons why stock markets may have overestimated the successfulness of these deals vary but could, for instance, be due to failure of foreseeing integration problems. (Less)
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author
Ericson Thordenberg, Jacob and Helgesson, Gustav
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Stock market reactions, Synergy realization, Mergers and acquisitions (M&A’s), Event Study, Case Survey, Management of enterprises, Företagsledning, management
language
Swedish
id
1625354
date added to LUP
2010-06-07 00:00:00
date last changed
2012-04-02 18:08:01
@misc{1625354,
  abstract     = {By using a set of firms engaged in merger activities, the aim of this thesis is to evaluate whether the stock markets were able to foresee synergy realization correctly in our specific companies. If markets show a tendency to over-/underestimate synergies, we find it interesting to investigate further why that is. A triangulation methodology, where the authors use more than one methodological approach, will be utilized in this thesis. Triangulation is defined as the combination of methodologies to studying the same phenomenon. We elaborate around a subsample from the case survey by Finkelstein and Larsson (1999) and apply both qualitative- and quantitative like approaches Prior research results from the case survey conducted by Larsson and Finkelstein will be used as an empirical foundation for synergy realization results. The deals included in our subsample from their study are defined as either successful or unsuccessful deals in terms of synergy realization. Additionally a short-term event study is undertaken in order to investigate if these deals experienced any abnormal returns deals using the market model. Our study found that all the acquiring companies in our sample gained abnormal returns in various event windows. This differ from the work by Bruner (2001) where he summarized the result from 130 different studies. He found that shareholders of the acquiring firms generally gained zero return. Seemingly, the stock markets failed to correctly anticipate the outcome for the companies classified as unsuccessful in terms of synergy realization. The reasons why stock markets may have overestimated the successfulness of these deals vary but could, for instance, be due to failure of foreseeing integration problems.},
  author       = {Ericson Thordenberg, Jacob and Helgesson, Gustav},
  keyword      = {Stock market reactions,Synergy realization,Mergers and acquisitions (M&A’s),Event Study,Case Survey,Management of enterprises,Företagsledning, management},
  language     = {swe},
  note         = {Student Paper},
  title        = {Stock Market Reactions and Synergy Realization from M&A’s - A Comparison between Event Study and Case Survey Results},
  year         = {2010},
}