M&A Deals Following Industrial Shocks: Value Creation or Value Destruction?

This study aims to analyze the effects of the deregulation events on the main industries that have experienced deregulation in the 1990s in the United States. That is, this research expands on the previous very few papers studying the merger activity following the industrial shocks by providing the new means of analyzing the true values ​​created from merger strategies compared to other strategies, such as internal development. The industries analyzed are banking, communication, petroleum and natural gas, and utilities. The research sample included data on 3087 mergers and acquisitions deals made between 01/01/1980 and 01/01/2009. The paper proposes new means of analyzing the true value created from the M&A deals following the deregulation events. We used event study methodology and the new methodology suggested by Bennett and Dam (2021) to test hypotheses. This work shows that the deregulation event plays an important role in determining the value created from merger strategies on the target side of the deal while showing mainly no significant results for the acquiring companies. Moreover, we have concluded that the long-term anticipation effect is essential to be taken into consideration when analyzing the performance of companies involved in the merger deals, meaning that event study methodology underestimates the true value created from M&A strategies.