Motives and Effects of Mergers and Acquisitions

WANG, JUANJUAN (2007) Motives and Effects of Mergers and Acquisitions. [Dissertation (University of Nottingham only)] (Unpublished)

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Mergers and acquisitions, nowadays, play significant roles for helping companies achieve certain objectives and financial strategies. This dissertation, firstly, presents three major types of motives of participating in M & A. This part involves the motives that increase or decrease shareholders' value or has uncertain impact on shareholders' value. The motives which increase shareholders' value include the synergy motive, improvement of managerial efficiency, achievement of economies of scale or scope, increased market power and increased revenue growth; whereas the motives which decrease shareholders' value include the agency motive, managerial hubris and free cash flow; the diversification motive has uncertain impact on shareholders' value. Secondly, the effects of engaging in M & A are examined based on four approaches in literature review. Generally speaking, M & A increase shareholders' value for the target company, whereas they decrease shareholders' value for the acquiring company or the newly combined company. Lastly, this dissertation advances quantitative research methodology- an accounting study-to measure the changes in the financial performance of the target and the acquiring company.

In order to control firm-specific, industry-specific, economic wide factor that may pose impact on the post-acquisition performance of the acquiring firm, the different financial performance indicators of the acquiring firm are compared with those of its non-acquiring peers. Moreover, two cases- Vodafone's acquisition of Mannesmann AG and the merger between AOL and Time Warner- are selected in order to check the literature results. The findings present that both the target company and the acquiring company had a healthy financial performance before mergers and acquisition, but the acquiring firm suffered a great deal of loss after mergers and acquisitions.

Item Type: Dissertation (University of Nottingham only)
Keywords: motives, effects, mergers, takeovers
Depositing User: EP, Services
Date Deposited: 07 Mar 2008
Last Modified: 22 Oct 2016 18:43

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