Explaining the Performance of Swedish Mergers & Acquisitions: Follow the Money or the Stock Market?

Sammanfattning: Title: Explaining the performance of Swedish mergers & acquisitions - Follow the money or the stock market? Seminar date: 2015-06-04 Course: FEKH89, Degree Project in Corporate Finance, Undergraduate Level, 15 ECTS-Credits Authors: Eleonor Andræ, Leonard Bergström, Ebba Friberg, Gustav Krieger Advisor: Rikard Larsson Key words: CAR, Pretax operating cash flow, Mergers, Sweden, Regression analysis Purpose: The purpose of this thesis is to investigate the relationship between the market‟s reaction to a merger and the development of operating perfromance during the subsequent years. Methodology: This is a study conducted with a deductive approach and of quantitative nature. The study uses regression analysis and correlation analysis in order to analyze and compare secondary data collected. Theoretical Framework: The theory of this study is based on previous research in the area of M&A‟s. The reference studies have been focusing on different measurements of post-merger performance. Former studies concentrate primarily on the market of North America and use a different time frame. Empirical Foundations: The empirical foundation of this study is information collected from 50 companies during the years of 2001-2007. CAR, pretax operating cash flow, and 4 different key ratios have been tested on these companies. Conclusion: This thesis finds no statistical evidence that the stock market efficiently predicts and accounts for the development of operating performance following an M&A. However, firm size appears to have an effect on the stock markets reaction to a merger announcement and the revaluation connected.