Post-acquisition Value Effects of M&A Deals: A Comparative Analysis in Developed and Emerging Capital Markets

This chapter contributes to the literature on M&A performance by examining the impact of M&A deals on company value over the long run in developed and emerging economies. Examining a sample of 153 and 125 deals from Western European and emerging capital markets respectively, 2002–2013, and employing economic profit as a performance measure, we find that transactions in developed markets create more value for shareholders than M&As in emerging economies over the 2-year period surrounding the deals. After adjustments for industry trends, economic profit significantly decreases for firms in emerging capital markets, taking negative values, while for companies in developed markets, we observe insignificant improvements in economic profit values following acquisitions. These results indicate that companies in emerging capital markets cannot achieve the planned synergies, integrate successfully, and improve the performance of the combined firms. We find that industry and geographical diversifications influence the performance of M&A deals in emerging and developed countries, respectively. We also find that the effects on company value differ for stock and cash deals and for high- and low-tech transactions in both markets. By testing the impact of economic crisis of 2007–2008 on the performance of M&A deals, we reveal that the adjusted economic profit does not differ significantly between pre- and post-crisis M&As.