Stock Market Reactions and Synergy Realization from M&A’s - A Comparison between Event Study and Case Survey Results

Sammanfattning: By using a set of firms engaged in merger activities, the aim of this thesis is to evaluate whether the stock markets were able to foresee synergy realization correctly in our specific companies. If markets show a tendency to over-/underestimate synergies, we find it interesting to investigate further why that is. A triangulation methodology, where the authors use more than one methodological approach, will be utilized in this thesis. Triangulation is defined as the combination of methodologies to studying the same phenomenon. We elaborate around a subsample from the case survey by Finkelstein and Larsson (1999) and apply both qualitative- and quantitative like approaches Prior research results from the case survey conducted by Larsson and Finkelstein will be used as an empirical foundation for synergy realization results. The deals included in our subsample from their study are defined as either successful or unsuccessful deals in terms of synergy realization. Additionally a short-term event study is undertaken in order to investigate if these deals experienced any abnormal returns deals using the market model. Our study found that all the acquiring companies in our sample gained abnormal returns in various event windows. This differ from the work by Bruner (2001) where he summarized the result from 130 different studies. He found that shareholders of the acquiring firms generally gained zero return. Seemingly, the stock markets failed to correctly anticipate the outcome for the companies classified as unsuccessful in terms of synergy realization. The reasons why stock markets may have overestimated the successfulness of these deals vary but could, for instance, be due to failure of foreseeing integration problems.