The performance of M&A deals: An asset pricing, indexing and sectoral approach

Details

Supervisors

PETIJEAN

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

This thesis put forward the use of a M&A index as an alternative investment to traditional sectorial indices. To that end, we identify five key industries in order to assess the potential benefits associated with sectorial M&A indices. We found that a M&A index could be a powerful diversification tool and that the risk-adjusted performance of some M&A indices competed with renowned benchmarks. Thanks to a segment analysis, we underline that M&A achieve better results according to the industry. Pursuing the inquiry of whether mergers create value on average, we update previous research by analysing the impact of M&A on shareholders’ value in the short and medium term. We demonstrate that M&A generate value around the announcement but only for target firms. This is consistent with the results obtained by Andrade, Mitchell, and Stafford (2001) twenty years ago. To that extent, our analysis shows that their results still stand today. We also uphold the conclusion reached by Alexandridis, Antypas, and Travlos (2017) for which there is a significant improvement in merger integration since the global financial crisis. To our knowledge, this study is the first to create and suggest the use of a M&A index. The major advantages are the size of the database analysed as well as the extensive period covered. Not only do we develop indices, we also attempt to define sectors for which the index could capture a maximum of value. Finally, we investigate investment opportunities and we spotlight the pharmaceutical sector as a potential flagship line of business to incorporate within a M&A index.