Re-examine The Long Term Post-merger Performance of Acquirers: UK Evidence

In the past decades, many papers have focused on the stock performance after an M&A deal. The results have shown that, for the target companies there is a generally acceptable conclusion that they receive economically large and statistically significant wealth gain in both US and UK studies. However, for those bidder firms, the reported return is still ambiguous, especially the long term post-merger performance of acquirers. There is also evidence that the stock abnormal return depends on the method of payment, the premium, the financial status of the acquired company etc. The purpose of this paper is to re-examine the long term post-merger performance of acquiring firms in UK and to explore whether M&A creates or destroys value to the acquirers. The results have confirmed the evidence that acquiring firm gets an average buy-and-hold abnormal return of -14.499% over three year post-merger period. Only 35.48% acquirers perform positive abnormal returns, showing obviously wealth loss after M&A. The result also supports the previous finding that value firms outperform glamour firms in long term