Title page for ETD etd-07012012-112048

Document Type Master's Dissertation
Author Halfar, Dieter Bernhardt
URN etd-07012012-112048
Document Title The effect of mergers and acquisitions on long-run financial performance of acquiring companies
Degree MBA
Department Gordon Institute of Business Science
Advisor Name Title
Prof M Ward Supervisor
  • long-run performance
  • acquisitions
  • intrinsic value
  • abnormal returns
  • operating financial performance
Date 2012-03-08
Availability unrestricted
Mergers and acquisitions continue to enjoy importance as strategies for achieving growth, although their success in creating shareholder value remains contested.

The aim of this research was to evaluate whether, in the long-run, acquiring companies created or destroyed value by evaluating the differences between pre- and post-acquisition firm performance, using, abnormal share price performance, operating financial performance and intrinsic value performance metrics.

This research used a non-representative, judgemental sample of 29 JSE listed firms to conclude that, on average, mergers and acquisitions destroy value within two years post-acquisition, although some evidence was found in support of acquiring firm value creation in the third year after the acquisition.

Results indicated a significant -6.62% decline in acquiring firm average cumulative average abnormal return (ACAAR) between 504 trading days before and after acquisition announcement dates. This finding reversed in year three, resulting in a positive ACAAR of 8.76%. Similarly, average intrinsic value (AIV) performance indicated that between one year before and one year after the acquisition, AIV deteriorated with a significant -0.131. However, between year one and two after the acquisition, AIV recovered by 0.112. Overall evidence indicated positive and significant AIV growth of 0.370 between one year before and three years after the acquisition. The research found insignificant results for the pre and post-acquisition evaluation of industry-adjusted cash-flow return on all assets (IACRAA).

2011, 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:

Halfar, DB 2011, The effect of mergers and acquisitions on long-run financial performance of acquiring companies, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-07012012-112048/ >


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