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Mergers & Acquisitions -Is the past the future?

Persson, Pontus and Pavlica, Semir (2011)
Department of Business Administration
Abstract
The main purpose of this study is to examine if the relationship between a target and an acquiring company´s abnormal return prior the transaction can affect the outcome in the future. Furthermore, our secondary purpose is to see if Swedish companies have a higher success rate compared to what earlier studies have shown about these phenomena. Finally our third purpose is to try to identify if there is a specific period that is superior to others. A quantitative examination method was used, where DataStream was used to collect data. The Buy and Hold abnormal return method was applied to our calculations. The merger and acquisition market have expanded during the years, but earlier studies have questioned if the transaction creates value or... (More)
The main purpose of this study is to examine if the relationship between a target and an acquiring company´s abnormal return prior the transaction can affect the outcome in the future. Furthermore, our secondary purpose is to see if Swedish companies have a higher success rate compared to what earlier studies have shown about these phenomena. Finally our third purpose is to try to identify if there is a specific period that is superior to others. A quantitative examination method was used, where DataStream was used to collect data. The Buy and Hold abnormal return method was applied to our calculations. The merger and acquisition market have expanded during the years, but earlier studies have questioned if the transaction creates value or not. Studies have shown that over 50 % fails to create value. The factors for this outcome differ from studies even though many point out cultural differences to be a key reason. Even if our results are not significant we can see a pattern between the relationship of the abnormal return for the target and acquiring company and the outcome of the merger or acquisitions. Our strongest relationship that we observed was that 75 % of the transaction had a negative outcome when the abnormal return was negative for both the target and acquiring firm post the transaction. Another result that differed from earlier studies was the success rate when the target had a positive abnormal return and the acquiring had a negative, the success rate was 65 %. We observed difference in the sectors, but also differences between conglomerates transactions, which had a success rate of 75 %, whereas vertical and horizontal was at 25 %. Even though we circumvent the cultural differences the total result for the transactions was, as earlier studies proven, more than 50% negative. Finally we did not observe a specific period that was superior to another. (Less)
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author
Persson, Pontus and Pavlica, Semir
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Merger and Acquisition, Abnormal Return, BHAR, Swedish stock market, Management of enterprises, Företagsledning, management
language
Swedish
id
2063974
date added to LUP
2011-06-03
date last changed
2012-04-02 19:04:57
@misc{2063974,
  abstract     = {The main purpose of this study is to examine if the relationship between a target and an acquiring company´s abnormal return prior the transaction can affect the outcome in the future. Furthermore, our secondary purpose is to see if Swedish companies have a higher success rate compared to what earlier studies have shown about these phenomena. Finally our third purpose is to try to identify if there is a specific period that is superior to others. A quantitative examination method was used, where DataStream was used to collect data. The Buy and Hold abnormal return method was applied to our calculations. The merger and acquisition market have expanded during the years, but earlier studies have questioned if the transaction creates value or not. Studies have shown that over 50 % fails to create value. The factors for this outcome differ from studies even though many point out cultural differences to be a key reason. Even if our results are not significant we can see a pattern between the relationship of the abnormal return for the target and acquiring company and the outcome of the merger or acquisitions. Our strongest relationship that we observed was that 75 % of the transaction had a negative outcome when the abnormal return was negative for both the target and acquiring firm post the transaction. Another result that differed from earlier studies was the success rate when the target had a positive abnormal return and the acquiring had a negative, the success rate was 65 %. We observed difference in the sectors, but also differences between conglomerates transactions, which had a success rate of 75 %, whereas vertical and horizontal was at 25 %. Even though we circumvent the cultural differences the total result for the transactions was, as earlier studies proven, more than 50% negative. Finally we did not observe a specific period that was superior to another.},
  author       = {Persson, Pontus and Pavlica, Semir},
  keyword      = {Merger and Acquisition,Abnormal Return,BHAR,Swedish stock market,Management of enterprises,Företagsledning, management},
  language     = {swe},
  note         = {Student Paper},
  title        = {Mergers & Acquisitions -Is the past the future?},
  year         = {2011},
}