Analysis of the Effectiveness of Mergers and Acquisitions in the Steel Industry

The fundamentals of the dynamics of the development of ferrous metallurgy in Russia and in the world of mergers and acquisitions. However, in recent years, the dynamics of the development of the industry is such that the question of how to further develop metallurgical companies (including russian) is becoming relevant. This paper is devoted to the study of the effectiveness of M&A transactions in the global steel industry and to identify the determinants of the success of these transactions. The study first examined the short-term market reaction to mergers and acquisitions of steel companies using the method of accumulated excess return on shares (event study), then analyzed the long-term effectiveness of mergers and acquisitions using the method of accounting study. Also, regression models for identifying determinants of the long-term effectiveness of mergers and acquisitions were built. To this purposes, information about mergers and acquisitions in the world's iron and steel industry, announced in 2000-2017 were used, unloaded from S & P Capital IQ. As a result, it was concluded that mergers and acquisitions have a positive impact on the prices of shares of companies-absorbers in the short term, as well as on their operating performance in two years after the transaction. The highest positive significant abnormal returns are observed on short event -windows. Based on the analysis of the long-term effect of mergers and acquisitions in the steel industry, it was found that the cross-border transaction has a negative impact on its long-term effectiveness. In addition, a positive relationship was found between the result of the m&a transaction in the long term and the financing of the transaction with the help of money funds, as well as the experience of the absorber company. At the same time, the size of the absorber company affects the positive outcome of the transaction in only one of the models.