Two sides of the same coin?

Sammanfattning: Purpose: This study’s purpose is to study the long term effects of M&A and to examine whether stock price is the only determinant of post-merger performance or if operating performance can be used as an additional determinant. How underlying variables impact these measures are also part of this study´s purpose. Methodology: A quantitative approach is used where two event studies are conducted to determine the long term effects of Mergers and Acquisitions. To study the stock performance a buy and hold abnormal return model with benchmark firms are used. The accounting figures will be measured by relating their development to an industry benchmark. To ensure the statistical T-tests are used in order to ensure statistical significance. Furthermore, multiple linear regressions will be used to examine how performance is affected by our set of variables. Theoretical framework: The theoretical framework includes a description of mergers and acquisitions and why they occur. Furthermore, the relevant theories for this study, efficient market hypothesis and information asymmetry are also presented. A review of previous research conducted on M&A:s is also conducted. Empirical foundation: The data sample consists of 64 transactions in Sweden, Norway, Denmark and Finland between 2004-01-01 to 2012-01-01. An additional criterion includes that both the acquirer and the target needs to be public. Conclusion: This study finds no significant results in either long term stock or long term operating performance. Furthermore the results from the correlation between the measures indicate that there are a significant linear relationship between the measures after 24 months. Variables that had a significant on at least one of the measures included relative transaction size, market-to-book ratio and industry relatedness of the target and acquirer.