Impact of Acquisitions on Acquirer Shareholder Returns (2001-2018)

Abstract

The merger waves of the 21st century have marked record values with the value of worldwide mergers and acquisitions peaking at 4.4 trillion USD in 2007 and 3.4 trillion USD in 2019. Given this surge in M&A activity over this period from 2001 to 2018, this paper investigates the impact of acquisition announcements on short-term and long-term acquirer returns. The short-term returns analysis indicates that the size of the acquirer has a negative impact on acquirer announcement returns, robust across the public status of the target. The long-term analysis employs a propensity score matching methodology for an analysis of acquirer returns over the two years after an acquisition announcement, compared to matched control firms that have not undergone an acquisition in two years. The results suggest that acquirers that complete more than two deals in the two years following an acquisition of a private or subsidiary target experience a higher return compared to matched control firms, despite short-term returns over these samples indicating a lower cumulative abnormal return for serial acquirers following an acquisition announcement. Further analyzing the role of financial advisors suggests an insignificant relationship between top-tier advisors and acquirer returns.