Shareholder preferences of Merger Deals and Industry Choices: A Case Study of UK Companies

Reimoo, Maleka (2007) Shareholder preferences of Merger Deals and Industry Choices: A Case Study of UK Companies. [Dissertation (University of Nottingham only)] (Unpublished)

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Mergers and acquisitions have gained enormous popularity in the recent past. There have been five trends in the previous century alone. There is however, a conflict in the literature regarding the impacts of such financial activities. While some researchers support mergers due to the financial profits associated with them, others argue against them as not being very favourable for the shareholders of the companies. This research therefore aims at calculating any abnormal returns to the shareholders of the acquiring companies using statistical model i.e. the event study. For this purpose, the data was divided into sub-samples according to the industry types; intra-industry mergers (horizontal and vertical mergers) and conglomerate mergers.

The overall sample resulted in a CAAR of -1.22% over the 11 day event window; -5, -4, -3, -2, -1, 0, 1, 2, 3, 4, 5. The data included merger deals including UK public limited companies from 2002 till the second quarter of 2007. Moreover, conglomerate mergers reported a higher negative CAAR of -2.16% than the intra-industry mergers, which had a negative CAAR of -0.52%. Thus, from the event study, it is evident that mergers tend to result in negative CAAR for the acquiring companies.

OLS Regression was then performed to statically choose the better type of merger for the shareholders of the companies involved. It also showed similar results that intra-industry mergers tend to be a better alternative to earn returns for the shareholders, atleast in the short run. These results could not be confirmed as the model used showed some lacking.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 07 Mar 2008
Last Modified: 13 Jan 2018 03:03

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