Mergers and Acquisitions Efficiency Valuation: Case Study

<p>This article considers the evaluation of mergers and acquisitions via various methodologies, including financial multiples changes analysis, event study and case study as the main part of the work. The main target of the investigation is to point out the results of integration deals depending on different factors.</p><p>Thereby, several aims were set, such as to figure out differences between m&amp;a deal types and motives, to define historical features of the integration deals market development and to produce corresponding forecasts based on up-to-date trends, to define the relation between different deal factors and its efficiency, to estimate the correlation between results from different methodologies and, finally, to make an in-depth study of Rosneft and TNK-BP deal. A rather new moment in the article is a try to define differences of conclusions by event study methodology depending on the reference point.</p><p>Zephyr Bureau Van Dijk was used as a database as well as Yahoo Finance! and Bloomberg for the manual collection of the data. The sample consists of merging companies or ones that are being about to make an m&amp;a deal of more than 200 million dollars from 2005 to 15 May 2014. Thereby, 6912 observations were produced with such characteristics as the name of the acquiring and target companies, its country and industry, deal value, bid premium, method of payment, announcement, rumor (the first appearance of information about the deal in the mass media) and deal completion dates, initial, acquired and final share in the target company, pre- and post-deal EV/EBITDA.</p><p>Another sample consists of 70 observations of public merging companies only for 2014 without EV/EBITDA in order to compare abnormal returns at the announcement and rumor dates. While most of studies based on the event study methodology consider only the announcement date, the information may be not surprising for the market and, thereby, the investigation results are distorted.</p><p>The relation of the most factors was found out to be insignificant due to the small size of the sample and several other factors considered in the article. Moreover, the correlation between the results of event study and financial multiples changes analysis turned out to be negative (-0,1639) despite the expectations. The differences between the results at announcement and rumor dates were defined as insignificant (P-value = 99,06 for &nbsp;t-test of the averages differences). This confirms the propriety of most investigations in this sphere.</p><p>As in some other investigations, a positive average cumulative abnormal return (+4,55%) was found for the acquiring company while buying an abroad country and negative returns (-0,78%) while making a national deal. Moreover a positive average cumulative abnormal return (+1,13%) was found for the acquiring company if the target is from the same industry and negative returns (-0,39%) while making a deal between different sectors.</p><p>Also the Rosneft and TNK-BP deal was considered for a more detailed and sound analysis. As a result, several conclusions were made about the deal efficiency and the valid synergy.</p>