Sources Of Synergy In Mergers And Acquisitions

Kim, Jin Young. 2011. Sources Of Synergy In Mergers And Acquisitions. Doctoral Dissertation, Cornell University.

The general findings of the merger literature have raised the question of why mergers continue to be so prevalent when there is no conclusive evidence of value gains. In particular, the zero or even negative stock price reaction of the acquirer firm surrounding the announcement has been puzzling. In order to provide insight into this apparent contradiction, this study examines the sources and the realization of synergistic gains from mergers and acquisitions more directly. Prior studies on the sources of synergy have not been very effective since the nature of the data may have obscured the true economic impact of mergers. Using the rich information gained from the U.S. hotel industry data from 1991 to 2009, this study investigates the sources of merger-related gains while controlling for the market condition. Along the way, the much-neglected area of value erosion from M & A is also addressed. The findings indicate that at the hotel property level, both the target and the acquirer show significant cost savings; target hotel properties achieve price gains when they are merged into similar brand families of the acquirer; acquirer hotel properties gain occupancy improvements from the demand spillover from the target hotel properties. The study also finds that local market conflicts have a negative impact on the revenue of both target and acquirer properties. No evidence was found for price-increasing collusion among the properties of the target and the acquirer. The investigation of the offer premium and the operating performance shows that the offer premium is positively associated with synergistic gains for the acquirer properties while it is non-significant for the target properties. These results suggest an interesting possibility that the premium may actually be a price to gain control over the target's resources, which is critical to generating value on the acquirer side.

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Roles Of Information In Corporate Mergers, Acquisitions And Investments

Simsir, Serif. 2009. Roles Of Information In Corporate Mergers, Acquisitions And Investments. Doctoral Dissertation, Cornell University.

The goal of this dissertation is to show how information asymmetries among market participants affect the way they operate in the financial markets. The first chapter investigates deal initiation in the context of mergers and acquisitions. We use Securities Exchange Commission (SEC) documents of the merging firms in our sample to discover which side (acquirer or target) initiated the deal. Our analysis indicates that target firms receive substantially lower premiums when they initiate the merger: abnormal returns to target firm stocks around the merger announcement date are 12 percentage points lower in such deals. When premiums are calculated over a longer time period, this difference increases to 27 percentage points. We argue that the information asymmetries between merging firms is the primary reason for this finding. Alternative explanations, such as financial distress and liquidity hypotheses, are considered as well. Our findings also relate to acquirer returns, synergy gains from mergers, characteristics of firms involved in buyer- and seller-initiated deals and the effect of the Sarbanes-Oxley Act on premium differences across initiation groups. The second chapter examines how information asymmetries within the set of outside investors influence the investment and financing decisions of firms. In our model, some investors have access to private level information which is not publicly available to others. We show that this external information asymmetry systematically influences the equilibrium stock price, which in turn affects firm's payoff from equity financing. In particular, firms are better off with equity financing when the information asymmetry among the set of outside investors is low. In the third chapter, we analyze past stock returns of the merging firms, and examine their role in explaining abnormal returns around the announcement of the merger to the public. We provide several hypotheses that link these two return variables, and discuss their relevance in our context.

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Promotion, Finance and Mergers in Canadian Manufacturing Industry, 1885-1918.

Marchildon, Gregory Philip (1990) Promotion, Finance and Mergers in Canadian Manufacturing Industry, 1885-1918. PhD Thesis, LSE-UK.

The existing research on the first merger waves in the United States, Britain, and to a lesser extent in Germany, has produced valuable information on the rise of the modern industrial enterprise. These studies reveal important similarities as well as a few significant differences in the nature of the economic development of these nations. A new merger series for Canadian manufacturing industry was generated to provide a further comparison. In addition, a large pool of information was gathered concerning the workings of promotional syndicates, corporate flotation’s, and secondary financial markets. This aggregate data, in conjunction with a case study of the most prominent Canadian promoter of the era and the companies he consolidated, is used to determine the relationship between security financing and the evolution of manufacturing industry in Canada. An explanation of the cause of the first Canadian merger wave, 1909-1912, is based on individual case evidence and the results of causality tests using aggregate data. The necessary pre-condition to a merger wave was the emergence of a broad market for Canadian industrial securities. Although high stock prices stimulated merger waves in Britain and the United States at the turn of the century, the first Canadian merger wave had to wait another decade until the expansion of the Canadian market and the tapping of the British market for Canadian "industrials" permitted large-scale flotations. The potential profits which were available through corporate reorganization, rationalization of manufacturing and distribution networks, and monopolization, were reflected in the higher rates of return which British investors sought en masse in the new Canadian securities. This flood of British capital in turn accelerated the industrial transformation taking place in Canada and encouraged further mergers. High stock prices triggered the first merger movement as they had in Britain and the United States. Corporate financiers became merger promoters as they catapulted propositions into consolidations large enough to be listed on public stock exchanges and to be of interest to prospective investors. High-risk financial methods provided the incentive to financial intermediaries to broaden this market as quickly as possible and, therefore, to deliver the maximum amount of cash to the new industrial consolidations.

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