Acquiring companies riding the merger wave - is it profitable for the shareholders? : An event study of the abnormal return and its changeability in periods of high and low M&A activity in Sweden

Sammanfattning: Purpose: The main objective of this thesis is to study if acquiring companies’ shareholders on the Swedish market earn abnormal returns after an M&A and further to examine possible differences in the abnormal return depending on whether the M&A is announced during a period with high level of merger activity or low level of merger activity. Method: This thesis uses a quantitative research method and an event study to examine abnormal returns. The abnormal return is obtained by calculating the difference between the actual return and the normal return. Stock prices for the thirty companies in the sample have been collected; fifteen M&As from periods characterized by high merger activity and fifteen M&As from periods of low merger activity. The event window consists in total of eleven days, five days before the announcement day and five days after. Day minus six is used as an index. Finally, the results have been tested with t-statistics for further analyzing. Conclusion: Our findings regarding the Swedish market in this thesis is not consistent with most of the previous research. Earlier research claims negative abnormal returns for the acquiring companies’ shareholders. In our study we have found that the Swedish acquiring companies’ shareholders actually earn positive abnormal returns after an M&A. Moreover, the abnormal returns are higher for M&As announced during times with high level of merger activity on the market compared to the abnormal returns for M&As announced when the level activity of merger is low.