Merger and acquisition activities in the hospitality industry

This study provides a comprehensive study of hospitality mergers and acquisitions (M&As) for the period between 1985 and 2004. The cumulative abnormal returns (CARs) for hospitality target and acquiring firms around the announcement of M&As are analyzed. The focus is on the returns of target and acquiring firms, as well as returns by three different hospitality industry segments (hotel, restaurant and gaming), by nature of acquisition, and by method of payment. In addition, it examines the influence of REIT and public status on the CARs of M&A participants; The overall findings are mixed. Some results are consistent with previous studies. For instance, hospitality targets enjoy significantly positive returns. The target returns from both tender offers and mergers are significantly positive; This study finds hospitality bidder returns are slightly positive and significant. This is consistent with the synergy motive for M&As. Also bidder returns to cash offers are higher than those of stock offers supporting information asymmetry and signaling theories; Unlike previous studies, target returns to stock offers are higher than cash offers. Most previous studies found target returns to cash offers are higher than stock offers. This is an indication of possible characteristics unique to the hospitality industry; Bidder returns from mergers are slightly positive; however, those of tender offers are not significantly different from zero which is contrary to previous studies showing bidder returns are generally higher in tender offers than mergers. Unlike previous studies, there is no association found between method of payment and nature of acquisition. The results suggest bidder returns are more likely to be positive with mergers using cash offers. This indicates the market reacted positively and expected synergy from friendly mergers