Does M&A create value for bidding companies?-----Empirical Studies from UK companies

Ye, Xin (2007) Does M&A create value for bidding companies?-----Empirical Studies from UK companies. [Dissertation (University of Nottingham only)] (Unpublished)

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The complex phenomenon that mergers and acquisitions (M&A) represent has attracted substantial interest from a variety of management disciplines over the past 30 years. Past literatures on M&A points out that there are various motives for undertaking a merger or an acquisition which lead to value conservation, creation or deduction of two entities namely the firm and the shareholder. Reviewing relevant studies suggest that while targeted firm shareholders generally enjoy positive short-term returns, shareholders in bidding firms frequently surfer share price underperformance. This dissertation aimed to examine how M&A affect shareholders value of acquiring firms and what are the factors lead to value-creation and deduction.

In terms of the methodology, this dissertation applied event studies and accounting-based studies to capture both short-term and long-term consequences of M&A for bidding companies. The sample contains 17 significant public corporation acquisition reported by the UK National Statistics from 2002 to 2004. Results from event studies demonstrate conflicting results, in that acquisition deal has added value to certain business yet there is significant underperformance after acquisition for some companies. Punch Taverns Plc has the greatest stock return in the short-time and it has been proved by its long-term financial performance. Friends Provident generated the worst abnormal return around the deal date and its slight growth is mainly contributed by the industry rather than by the acquisition deal. There are several factors separate value-creating from value-destroying transactions. For example, strategic acquisition, superior and integrated management can actively pursue the opportunities by achieving operative synergies and create value for acquiring firms; however, improper way of financing acquisition and divided management would destroy the opportunities and lead to value deduction.

We have to note that there are several limitations of this research questions such as the lack of significant evidence on efficiency market and further researches are thus suggested.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 23 Jul 2008
Last Modified: 16 May 2018 10:55

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