Do mega-mergers create value? The acquisition experience and mega-deal outcomes

Hu, N.; Li, L.; Li, H.; Wang, X.

Abstract

Existing literature shows that mega-M&A deals valued over $500mil end up destroying the shareholder value of acquirers on a significant scale. Our paper considers mega-deal as a dependent event and examines the role of acquirer’s previous acquisition experience playing in the outcome of mega-deals. We find that mega-deals conducted by firms with a high level of acquisition experience, i.e. a firm completed at least 12 transactions before, are more likely to be completed. In addition, more experienced acquirer of mega-deals generate positive abnormal stock returns for shareholders in both short-run and long-run, with a dollar value gain of $50.6 million around deal announcement. We also find that more experienced acquirers are better at managing the post-acquisition integration process and enjoy a significant improvement in operating performance.

Citation

Hu, N., Li, L., Li, H., & Wang, X. (2020). Do mega-mergers create value? The acquisition experience and mega-deal outcomes. Journal of Empirical Finance, 55, 119-142. https://doi.org/10.1016/j.jempfin.2019.11.004

• Journal Article Type: Article
• Acceptance Date: Nov 7, 2019
• Online Publication Date: Nov 14, 2019
• Publication Date: Jan 31, 2020
• Deposit Date: Nov 9, 2019
• Publicly Available Date: May 14, 2021
• Journal: Journal of Empirical Finance
• Print ISSN: 0927-5398
• Electronic ISSN: 1879-1727
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 55
• Pages: 119-142
• DOI: https://doi.org/10.1016/j.jempfin.2019.11.004
• Public URL: https://durham-repository.worktribe.com/output/1314271