Definition of Factors Influencing the Premium in M&A Deals

Bachelor thesis topic: Definition of Factors Influencing the Premium in M&A Deals The total value of mergers and acquisitions is growing rapidly year after year, as more and more companies choose M&A as a growth strategy. Many consulting firms predict further increase in the total value of deals and their number. This study is dedicated to determination of factors influencing the premium size. This paper includes review of works of authors who had previously conducted research in this area, and also consideration of the most modern articles and reports of various consulting companies in order identify new trends in M&A market. The work considers theoretical aspects of mergers and acquisitions, the motives for M&A deal conduction, the main reasons for making unsuccessful transactions, global trends in M&A market, as well as an overview of the factors influencing premium size. The practical part of this study is dedicated to the creation of the model that determines the optimal premium size. It was found that the premium size depends positively on the Q-Tobin ratio of the target company and its leverage and negatively on the of its net assets size. It was also revealed that the premium will be lower in domestic deals in comparison with foreign ones, but the premium will decrease if the company belongs to a developing country. Moreover, the size of the premium will be higher in case of conglomerate merger or acquisition.