The Long-Run Performance of U.S. Bidding Firms in the Post M&A Period: The Impact of Bid Type, Payment Method and Industry Specialisation

摘要

This study investigates how mergers and acquisitions (M&A) affect the wealth of shareholders of public firms in the United States (U.S). More specifically, it investigates whether the nature of the bid, the payment method used, and the type of M&A have implications for shareholders of U.S bidding firms. The study analyses 352 mergers and acquisitions in the U.S during the period 1999-2008, and its results indicate that bidding firms suffer significant negative buy-and-hold abnormal returns in the three years period after a M&A announcement. The results also suggest that, in the long-run, hostile bids and cash-financed bidders outperform friendly bids and stock-funded bidders, respectively. Furthermore, the study also finds that in the long-run bidder firms that focus on industry specialisation within their M&A targets significantly outperform firms that adopt a more diversified strategy. The analysis also investigates the effects of M&A specialisation/diversification in six different sectors, and finds that specialised bidders outperform diversified bidders in four sectors: consumer & basic materials, energy & utilities, communications and technology. Furthermore, bidder firms in the financial services sector perform significantly better when diversifying into other sectors, while the performance of bidder firms in the industrial sector appears unaffected by the degree of M&A specialisation or diversification.