Title page for ETD etd-04042011-173802


Document Type Master's Dissertation
Author Chadha, Virat
URN etd-04042011-173802
Document Title The impact of earnout structure on bidder firm share price in mergers and acquisitions on the JSE
Degree MBA
Department Gordon Institute of Business Science
Supervisor
Advisor Name Title
Ms T Pieterse Supervisor
Keywords
  • information asymmetry
  • earnout
  • acquisitions
  • mergers
  • human capital
Date 2011-04-20
Availability unrestricted
Abstract

Earnout as a method of payment in an M&A allows for a number of advantages over the traditional choices of exchange medium, such as cash and stock. This study seeks to validate some of the conclusions drawn by existing literature, in the South African context and add value by investigating two specific attributes, namely the size of the earnout as well as the period over which an earnout may be evaluated; and their impact on the acquirer stock return. The investigation is conducted based on the analysis of event period abnormal gains for the acquirer over the event periods of 10 days; 5 days and 1 day around the announcement of the merger or acquisition.

Over the period 2003 2009, the data lends significant support to the view that earnout ratio larger than 51% leads to higher abnormal gains than those less than 51% of the total transaction value.

Copyright 2010, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria.

Please cite as follows:

Chadha, V 2010, The impact of earnout structure on bidder firm share price in mergers and acquisitions on the JSE, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-04042011-173802/ >

F11/118/ag

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