Evaluation of the Effectiveness of Mergers and Acquisitions in the Retail Industry

The purpose of this study is to assess the effectiveness of mergers and acquisitions in the retail industry and to identify the factors that influence their effectiveness. For this work the event study and regression methodologies were chosen. During the work several hypotheses were formulated, which were then tested on a sample of 271 transactions in the retail sector over the past 7 years. Based on this analysis, we can conclude that market participants in the retail industry mostly insignificantly react to the news of mergers / acquisitions, and to the information about the release of the annual financial statements of the buying company. As it has been revealed, this result is partly due to the peculiarities of the selected industry: the relatively small size of companies and the value transactions. Despite the insignificance of CAAR, negative reaction of investors to the news about the deal (CAAR = -0,003) and a positive reaction (CAAR = 0,001) to the announcement of financial results were estimated. Also, there were no significant differences in the efficiency of transactions, depending on the membership of the acquiring company in the developed or developing countries group. Average yields on the country’s groups were equally insignificant, although there was stronger reaction of market players to M&As in the developed countries, CAAR = -0,0025 against -0.00097 in developing nations. Besides, during the work the effect of several parameters on the anomalous accumulated return was evaluated. After the construction of the four least square regressions it was founded that the volume of transactions, the amount of retail space the target company possesses and FCFF of the buying company do not have a significant impact on the CAR value, while the segment of the acquiring company's business transactions and territoriality, on the contrary, significantly affect the efficiency.