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

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

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 acquirers 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.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Hu, Dr Nan
• Authors: Hu, N., Li, L., Li, H., and Wang, X.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: Journal of Empirical Finance
• Publisher: Elsevier
• ISSN: 0927-5398
• ISSN (Online): 1879-1727
• Published Online: 14 November 2019
• Copyright Holders: Copyright © 2019 Elsevier B.V.
• First Published: First published in Journal of Empirical Finance 55: 119-142
• Publisher Policy: Reproduced in accordance with the publisher copyright policy