Publication
Mergers and acquisitions outcomes: the role of R&D and intangible assets
| Summary: | Mergers and Acquisitions (M&As) have been used by companies as a mean to invest in R&D and Intangible Assets. The main purpose of this study is to analyse if differences between the target firm and the acquiring firm in terms of R&D and Intangible Assets could affect the outcome of M&As. Does this result in the creation or destruction of value for the target and acquirer shareholders? The sample comprises 2,760 deals from the United States of America and the Eurozone throughout 15 years – from 2005 to 2019. The stock price reaction to the announcement of an acquisition is measured by the cumulative abnormal returns (CARs). Concerning the intangible assets, I do not find evidence for the theory of adverse selection. The idea that the target firm is bought at a discount due to the possibility of information asymmetries is not confirmed in this study. About the R&D expenditures, the idea that the acquirer is buying a firm with relatively higher R&D expenditures to enter a tech environment and, therefore, gain with the deal is not confirmed in this study. I find evidence that the combined firms incur losses when the target has relatively higher R&D expenditures than the bidder. I also find that targets firms with relatively higher R&D expenditures than the bidder gain with the announcement of the deal. Some authors defend that the idea - that the acquirer is buying a target with relatively higher R&D expenditures to enter into a tech environment and, due to that, gain with the M&A - is especially significant in a tech environment where R&D capabilities are crucial for further expansion of companies, however, I do not find support for that in this analysis. Regarding the differences between deals made by the Eurozone firms and the USA firms, I do not find results that show differences between the two geographical zones. |
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| Main Authors: | Pereira, Mário Jorge da Cunha |
| Subject: | Intangibles assets Mergers and acquisitions Research and development Cumulative abnormal returns Ativos intangíveis Fusões e aquisições Investigação e desenvolvimento Rendibilidades anormais acumuladas |
| Year: | 2021 |
| Country: | Portugal |
| Document type: | master thesis |
| Access type: | open access |
| Associated institution: | Universidade do Minho |
| Language: | English |
| Origin: | RepositóriUM - Universidade do Minho |
| Summary: | Mergers and Acquisitions (M&As) have been used by companies as a mean to invest in R&D and Intangible Assets. The main purpose of this study is to analyse if differences between the target firm and the acquiring firm in terms of R&D and Intangible Assets could affect the outcome of M&As. Does this result in the creation or destruction of value for the target and acquirer shareholders? The sample comprises 2,760 deals from the United States of America and the Eurozone throughout 15 years – from 2005 to 2019. The stock price reaction to the announcement of an acquisition is measured by the cumulative abnormal returns (CARs). Concerning the intangible assets, I do not find evidence for the theory of adverse selection. The idea that the target firm is bought at a discount due to the possibility of information asymmetries is not confirmed in this study. About the R&D expenditures, the idea that the acquirer is buying a firm with relatively higher R&D expenditures to enter a tech environment and, therefore, gain with the deal is not confirmed in this study. I find evidence that the combined firms incur losses when the target has relatively higher R&D expenditures than the bidder. I also find that targets firms with relatively higher R&D expenditures than the bidder gain with the announcement of the deal. Some authors defend that the idea - that the acquirer is buying a target with relatively higher R&D expenditures to enter into a tech environment and, due to that, gain with the M&A - is especially significant in a tech environment where R&D capabilities are crucial for further expansion of companies, however, I do not find support for that in this analysis. Regarding the differences between deals made by the Eurozone firms and the USA firms, I do not find results that show differences between the two geographical zones. |
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