Mergers and Acquisitions as a Growth Strategy and the Effects of the Strategy on the Premium

The paper explores the effect the strategy of the company has on the premiums paid in the M&A deal and answers the question whether the companies that make a purchase as a center part of their general growth strategy tend to overpay for the targets, compared to the deals made with different incentives. In order to have a full understanding of the M&A deals, the research starts with a thorough revision of the M&A deals process, effects, valuation and general overview of several types of deals that are usually meant by the term “M&A deal”. In order to test the hypothesis, the research uses a method of a simple OLS regression based on the data of the M&A deals that happened in the world within the Metals and Mining industry between 2000 and 2020. The research tests the effect of several variables, such as net assets, revenue, country of origin, industry of the target and, mainly, the strategy of the buyer on the sum paid for the acquisition of 100% of the target company. The research shows that while a Deal Size in affected by a large number of variables, when a company is eager to make a purchase as one of the only available tools for growth, it is clear that overpaying for the target becomes a common trend on the market.