Mergers and Acquisitions Effects on Interest Expense of Buyers

Student: Gorenichiy Alexander

Supervisor: Ilya Partin

Educational Programme: Economics (Bachelor)

Year of Graduation: 2019

In this paper, we examine effects of M&A deals on interest expense of buyers. A lot of studies analyze value and operational synergies creation as a result of M&A’s. However, financial synergies are examined less, mostly studies reveal some positive effects for targets, such as relief from financial constraints and better access to finance. In our research, we focus on buyers and analyze the little-studied aspect of financial efficiency – interest expense. On a sample of 543 deals, taking place from 2011 to 2015, we demonstrate that buyers decrease average borrowing rate by 28 basis points three years after the deal. We also found that high Tobin’s Q of seller helps to decrease interest expense of the merged company.

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