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Title: M&A Performance in Downturns : Evidence from the U.S. Banking Industry
Authors : Aegerter, Philip
Advisors / Reviewers : Manz, Peter
Publisher / Ed. Institution : ZHAW Zürcher Hochschule für Angewandte Wissenschaften
Issue Date: 2016
Language : Englisch / English
Subject (DDC) : 332: Finanzwirtschaft
658.1: Organisation und Finanzen
Abstract: The topic of merger and acquisitions (M&A) has received wide attention in the management literature. To date, a vast majority of scholars conclude that, on average, M&A transactions tend to be value diminishing for acquirer shareholders. However, the thesis at hand unfolds a more differentiated story. The thesis investigates the influence of market cycles on M&A performance in the U.S. banking industry, obtained from firm-level data from January 2000 to December 2009. The research is based on a sample of 112 U.S. banks, each experiencing different market cycles during the observation period. The issue of M&A’s during challenging markets is becoming increasingly relevant, especially since financial crises have become a worldwide phenomenon in the last two decades. The central hypothesis advocates that M&A’s undertaken during downturns are of better quality and offer more value creation opportunities than those undertaken during booming markets. Moreover, it is predicted that method of payment, bidder experience and relative size are key moderators of M&A performance. Given the structure of the data, event study methodology, descriptive statistics, univariate analysis and hierarchical multiple linear regression analysis are applied to analyze the dataset. The results of the empirical analysis lend strong support to the core arguments of the thesis. Consistent with the results of prior studies, the findings indicate that most M&A transactions (58%) fail to add shareholder value. However, by creating subsamples that separate deals by market cycles, it is evident that transactions in downturns significantly outperform acquisitions in booming markets. In addition, M&A deals announced during upturns and paid with shares, as compared with cash, lead to significant value destruction for the acquirer shareholders. For the variable experience or relative size, no significant relationship is observed that alters the performance of M&A’s. Overall, the results of the study underscore the importance of incorporating the external environment into decisions regarding strategic adaptations. Strong evidence signifies that managers who are deliberately avoiding M&A deals in challenging markets may be missing an important strategic opportunity. Downturns can be an ideal time for companies to use M&A strategically to buy undervalued targets, consolidate markets and strengthen their competitive advantage.
Departement: School of Management and Law
Publication type: Thesis: Bachelor / Bachelor Thesis
DOI : 10.21256/zhaw-1240
Appears in Collections:Abschlussarbeiten Betriebsökonomie

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