M&A Strategies and Shareholder Value on Emerging Capital Markets

Student: Gorbatov Georgij

Educational Programme: Bachelor

Year of Graduation: 2014

<p style="text-align: justify;">The significant growth of global M&A market during the last decades caused the substantial interest in studying the efficiency of M&A deals. Nevertheless the majority of works that were dedicated to this problem revealed rather controversial results. Moreover, the relevant question of M&A strategies’ influence on deals’ efficiency is still scarcely explored especially during the period after the global financial crisis in 2008. In addition, among the possible M&A deal strategies many authors distinguished only horizontal and diversification deals leaving the vertical mergers and acquisitions unstudied. Therefore the main purpose of this paper was the estimation of different M&A strategies’ (vertical, horizontal and conglomerate) influence on acquiring companies’ shareholder value on emerging capital markets of BRIC countries during the post-crisis period. For this purpose the estimation model of different M&A strategies’ influence on bidder’s shareholder value was developed on the basis of the event study approach. In order to classify different types of M&A deals the vertical relatedness coefficient was used. It was introduced by Fan and Lang [Fan, Lang, 2002] and it is calculated with the usage of the information from the input-output tables. To estimate the model the data about 340 M&A deals that were announced after July 2009 was employed. The acquiring companies in these deals were public non-financial firms from BRIC countries. The model revealed statistically insignificant changes in acquiring firms’ shareholder value as a result of M&A deals announcements for the total sample of deals as well as for particular M&A strategies (vertical, horizontal and conglomerate). Nevertheless the significant increase in Russian bidders’ shareholder value was detected as well as the opposite results were obtained for Chinese M&A market. These facts are the evidences of M&A deals efficiency on Russian capital market. The positive effect of horizontal deals was detected on Indian and Brazilian M&A markets while the conglomerate deals led to the increase of acquiring companies’ shareholder value only in India. Vertical mergers and acquisitions did not lead to significant changes in bidders’ shareholder value and this result was supported by the regression analysis. Comparing these findings with the pre-crisis research results the substantial drop of acquirers’ positive cumulative abnormal returns to statistically insignificant level was detected for three main types of M&A deals (vertical, horizontal and conglomerate). Such results can be connected with the high level of uncertainty on global markets and with the rising risks for investors who reservedly react to M&A deals announcements.</p>

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