Large Wealth Creation in Mergers and Acquisitions

63 Pages Posted: 13 Mar 2012 Last revised: 8 Nov 2017

See all articles by Eliezer M. Fich

Eliezer M. Fich

Drexel University - Department of Finance

Tu Nguyen

University of Waterloo - School of Accounting and Finance

Micah S. Officer

Loyola Marymount University - Department of Finance and Computer Information Systems

Date Written: November 7, 2017

Abstract

We examine completed M&A deals with large acquirer shareholder dollar wealth gains at announcement. We find that large-gain acquisitions are (i) typically “bolt-on” deals that are small relative to the acquirer’s size; (ii) transaction-specific events (not firm- nor CEO-specific events); (iii) enhanced by synergies of the merged firm; and (iv) executed by bidders with high valuation multiples. These findings provide important insight into the factors associated with considerable wealth creation for acquirer shareholders in M&A deals. The comparison between dollar returns and percentage returns in acquisitions highlights significant differences in the two methods of valuing merger outcomes. In addition, the analysis of various quantiles of merger returns sdsdthe importance of studying both the tails and the non-tails of the distribution.

Keywords: Mergers and acquisitions; wealth creation; financial reporting irregularities

JEL Classification: G34, L25

Suggested Citation

Fich, Eliezer M. and Nguyen, Tu and Officer, Micah S., Large Wealth Creation in Mergers and Acquisitions (November 7, 2017). AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=2020507 or http://dx.doi.org/10.2139/ssrn.2020507

Eliezer M. Fich (Contact Author)

Drexel University - Department of Finance ( email )

LeBow College of Business
3220 Market Street – 11th Floor
Philadelphia, PA 19104
(215) 895-2304 (Phone)

Tu Nguyen

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada

Micah S. Officer

Loyola Marymount University - Department of Finance and Computer Information Systems ( email )

Los Angeles, CA 90045
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
1,061
Abstract Views
4,810
rank
19,960
PlumX Metrics