The Effect of Terminated Bids in Mergers & Acquisitions - A study on the effect of terminated bids’ buy-and-hold abnormal returns in a short- and long-term perspective on the European market 1990-2015

Sammanfattning: The purpose of this thesis is to examine the target firm’s abnormal returns in two aspects; short-term and long-term after a bid gets terminated for different categorizations and payment methods. The approach is the buy-and hold abnormal returns presented by Barber & Lyon (1997). The approach of control firms are used in the context of BHAR as recommended by Safieddine & Titman (1999). This thesis uses the synergy and information hypotheses and five major earlier studies conducted on the subject. In addition a practical framework is used to enhance the depth of the analysis. This thesis uses 175 terminated bids with different categorizations on any European Stock Exchange. The data from 1990-2015 is gathered from Bloomberg database as well as Thomson Reuters Eikon & Datastream. This thesis concludes that in there is no statistical differences in the categorization of bids and payment methods, however it provides tendency that friendly bids outperform hostile ones, strategic outperforms financial ones and hybrid outperforms cash which in turn outperforms common stock. The findings also conclude that, disregarding any categorizations, there are positive abnormal returns in a short-term perspective but negative in the long-term perspective of one year.