Deal characteristics and M&A performance: How do hospitality firms fare?

Abstract

The global hospitality industry has experienced significant consolidation in the past several decades. While evidence in the general business literature suggests that the target firm shareholders gain instead of the acquiring firm shareholders, some studies in the hospitality industry have suggested that mergers and acquisitions (M&As) are also beneficial to acquiring firms. Using a comparative study design and a comprehensive sample over 41 years, we empirically examine whether M&As create more value in the hospitality industry than in other industries and whether certain deal characteristics may explain the potential performance differential. Overall, we find that M&As in the hospitality industry outperform M&As in non-hospitality sectors. When examining deal attributes, we find that relative size of target, cash method of payment, and an unlisted target are characteristics positively related to merger performance and help explain some of the performance differential. We contribute theoretically and empirically to the literature by demonstrating that industry and deal effects play an important role in M&A performance. • Mergers and acquisitions (M&As) in the hospitality industry outperform those in the non-hospitality industries. • Industry relatedness is insignificantly related to acquirer abnormal returns around the merger announcement. • Relative size, cash payment, and unlisted target are positively related to acquirer announcement abnormal returns. • Industry relatedness, relative size, and cash payment are higher in hospitality vs. non-hospitality acquisitions. • Unlisted target is not significantly different between hospitality and non-hospitality acquisitions.