Abstract
This study presents the results from a comprehensive out-of-sample test of long-run returns following mergers and acquisitions (M&As). Using a unique sample from 23 frontier markets of almost 800 transactions conducted during the years 1992 to 2016, we implement both cross-sectional tests and time-series examinations based on a calendar-time portfolio approach. Contrary to evidence from developed markets, the M&As in these frontier markets do not lead to abnormal underperformance of acquirers, regardless of whether they paid for the acquisition with cash or stock. The results are robust to many considerations, including subsample and subperiod analysis, alternative formation periods, different portfolio construction approaches.
Highlights
In 1998, German-based Daimler-Benz AG and U.S.-based Chrysler Corporation, two leading global car manufacturers, decided to combine their businesses in what was perceived to be a merger of equals (Casestudyinc 2008)
We examine the performance of acquirers from frontier markets for the years 1997 through 2016
The present study examined the long-run performance of acquirers following mergers and acquisitions (M&As) deals
Summary
In 1998, German-based Daimler-Benz AG and U.S.-based Chrysler Corporation, two leading global car manufacturers, decided to combine their businesses in what was perceived to be a merger of equals (Casestudyinc 2008). Daimler paid 37 billion USD in a stock swap exchange and on November 17, 1998, DaimlerChrysler’s joint chiefs launched global trading in the shares of the new company which, with a market capitalization of 100 billion USD, was the world’s fifth-largest car maker. The opening ceremony was broadcast on DaimlerChrysler’s business TV channel to all of the 260 DaimlerChrysler plants in 25 countries so that each of the more than 400,000 workers could celebrate this special moment (Gallagher 1998).
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