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Mergers and Acquisitions, Take-Over

C/F/46. What is the resulting outcome of an M&A Deal Announcement Shock on the Share Price Performance? The modern evidence of the UK financial markets data in a short-medium term window.

WORDS:

10500

DATE:

2003

PRICE:

139.99 GBP

The growth in the number of Mergers and Acquisitions during the last few decades has been staggering. The area of M&As has become vastly important for both academics and practitioners. Although the number of research conducted in this area has been overwhelming the results are mostly inconclusive and controversial, and it is clear that further research in to this topic is important. As been noted by many 'gurus' in this field there are numerous new issues surrounding this area and the prospective researches would require more and more depth as well as strength of analysis. The following research attempts to evaluate the effect and outcome of the 'announcement shock' on the stock performance and returns of a 100 deals occurred in UK during the four year period (1998-2001). The research has been conducted on a stage of 'announcement' (-40,40days) and on the post-merger stock performance and return of the selected 62 bidders during the substantial period (up to 16 months). The results obtained by the conducted research demonstrate that round the announcement date and in the previous days the target firms accumulated gains on average of 14% and statistically significant at 5% level. It is also shown that market's behaviour in respect to bidders stock is in the opposite direction, as they obtain significant losses. The post- merger performance analysis of the selected deals confirm that M&As lead to wealth destruction for the combined firm in an economic sense. Thus, it could be said that despite of the number of studies in this area markets still seem overoptimistic when an M&A is announced especially for the target firm, so the future research is vital.

KEYWORDS: f, resulting, outcome, deal, announcement, shock, share, price, performance, modern, evidence, uk, financial, markets, data, short-medium, term, window,