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

Nan Hu, Lu Li, Hui Li and Xing Wang

Journal of Empirical Finance, 2020, vol. 55, issue C, 119-142

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.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:55:y:2020:i:c:p:119-142

DOI: 10.1016/j.jempfin.2019.11.004

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