You may withdraw your consent to cookies at any time once you have entered the website through a link in the privacy policy, which you can find at the bottom of each page on the website. Customize cookies. Skip to the content. EY Parthenon. Recent searches. See all results for. Trending How risk managers can pivot from stabilization to transformation 15 Oct Risk. Cybersecurity: How do you rise above the waves of a perfect storm?
Select your location Change. Local sites. Connect with us. Link copied. Gregory Schooley. Related topics Strategy and Transactions Strategy Mergers and acquisitions. Read more. It is important for companies to pursue the right deals at the right time that are based on strategy. Once a target has been identified, it can be imperative to develop a sound understanding of its business, operations, industry and competitors.
Select Format Select format. Permissions Icon Permissions. Abstract There is little evidence in the literature on the relative importance of the underlying sources of merger gains. All rights reserved. For Permissions, please e-mail: journals. Issue Section:. You do not currently have access to this article.
Download all slides. Sign in Don't already have an Oxford Academic account? You could not be signed in. Sign In Forgot password? Don't have an account? Sign in via your Institution Sign in. On average, the overall value of both acquirer and acquired increases, which indicates that the market believes the announced deals will create value.
This has been the case for the average acquisition going back 30 years, and it remains the case today. If combined returns are positive, mergers certainly create value for the overall market, and, therefore, for investors in index funds.
From there on, however, the story gets more complex. In the longer run in which the acquired company disappears as the merger is completed , the value of acquiring companies tends to go up in all-cash deals. Add that to the value created at the announcement of a merger, and there is significant value created.
Stock deals are complicated by the fact that they supply investors with two important pieces of information. The first is straightforward: about the merger itself, and whether the acquisition makes sense for the buyer.
If the acquirer is prepared to give the owners of the target company a lot of stock to complete the deal, it is effectively telling the world that it believes its stock to be overvalued—or, at the very least, that it does not think its stock is undervalued, since if it were undervalued, it would not be so willing to give it away.
Nevertheless, the average all-stock deal still creates value overall at the time of the announcement. Thereafter, however, there tends to be a downward drift. Because the value of an all-stock deal is a combination of how the market values the takeover itself and how it values the acquiring company, it is impossible to say whether this loss in value is because of the deal itself or because the buyer was thought to be overvalued in the first place.
In general, then, cash mergers tend to create value in both the short and longer run, while stock deals only do so in the short run.
The authors also regress AR with firm-specific factors, the consideration of which is scarce in the previous literature. Reddy, K. Report bugs here. Please share your general feedback. You can join in the discussion by joining the community or logging in here.
0コメント