Empirical Research On The Effects Of M&A On Long-term Shareholder Value Of Acquiring Firms

M&A strategy has been a popular development strategy for firms all over the world. In the past century, waves of M&A emerged from time to time. In the21st century, the value of M&A deals is increasing. M&A has become the main way of investment in capital market. Over the recent five years, the value of M&A deals in American and European markets is decreasing. At the mean time, the M&A deals in emerging markets account for a large percentage of global M&A deals. The waves of M&A have shifted from advanced countries to fast-growing regions such as Asia and South America. With the popularity of M&A in the world, M&A activities have increasingly become a focus of study in several academic fields such as management, finance and accounting. Opposite to the increasing value and number of M&A deals, empirical evidences do not give a consistent conclusion about if M&A could create value and if related M&A could create more value than unrelated ones. Researchers and practitioners have been obsessed by the success paradox and synergy paradox of M&A. Choosing M&A in which the acquiring firms are A-share high-tech listed firms in China as the sample, this dissertation constructs a theoretical analysis framework of the effects of M&A on shareholder value of acquiring firms from the perspectivs of motive, type, and technology relatedness of M&A. Based on the theoretical analysis framework, this dissertation examines the effects of M&A on long-term shareholder value of acquiring firms by event study and multiple regression analysis to explicate the success paradox and synergy paradox of M&A, improve and develop the theories of M&A.Dealing with the success paradox of M&A, based on the traditional motive theories of M&A, this dissertation examines the effects of M&A with different motives on long-term shareholder value of acquiring firms by dividing the sample of M&A into subsamples with different motives by analyzing text information about motive disclosed by listed firms. The research finds that M&A with the motive of synergy could increase shareholder value of acquiring firms in the long term. M&A with the motive of acquiring growth, acquiring specific assets and acquiring market share could not increase shareholder value of acquiring firms in the long term. And there are limitations for three theories of the traditional motive theories of M&A, namely, the theories of market power, under valuation and diversification, in explaining the M&A in Chinese high-tech industries. This research examines the relationship between common motives of M&A and long-term shareholder value of acquiring firms by analyzing the text information of information disclosure of listed firms, thereby improving and developing the motive theories of M&A. This research also provides theoretical basis for the method of investment decision making by analyzing strategic information of listed firms.Dealing with the synergy paradox of M&A, based on analyzing the mechanism of value creation by synergy in M&A with different types based on the theory of synergy, this dissertation examines the effects of M&A with different types on long-term shareholder value of acquiring firms in high-tech industries. The research finds that conglomerate and horizontal M&A could not increase shareholder value of acquiring firms in the long term in high-tech industries, only vertical M&A could, which indicates that firms in high-tech industries tend to get synergy more easily from vertical M&A than horizontal M&A in related M&A. Theses findings develop the theory of synergy and provide theoretical basis for managers with motive of synergy, acquiring growth and acquiring market share when choose the type of M&A in practice. Considering the sample of this research is nontechnology M&A of high-tech firms, the results of this research also indicate that firms in high-tech industries could create value for shareholders in the long term through acquiring complementary assets, which enriches and develops the theories of complementory assets.Dealing with the synergy paradox of M&A and considering the increasing numbers and importance of technology M&A, based on absorptive capacity theory, knowledge relatedness analysis, and the analysis of the relationship between technological innovation and corporate value, this dissertation improves the groundbreaking method of measuring technology similarity and complementarity between acquiring and target firms proposed by foreign scholars, which makes the new measures could be used to justify technology similarity or complementarity between acquiring and target firms. Then this dissertation divides the sample of related technology M&A into two subsamples by analyzing the text information on the motive of M&A and patent data, and examines the effects of acquiring similar technology and acquiring complementary technology in related technology M&A on long-term shareholder value of acquiring firms. The research finds that acquiring similar technology and complementary technology could not increase shareholder value of acquiring firms in the long term. And acquiring complementary technology would destroy shareholder value of acquiring firms in the long term. This research not only provides empirical evidence for the effects of technology M&A on shareholder value of acquiring firms, theoretical basis for the research on the motive of technology M&A, but also provides theoretical basis for managers with the motive of technical assets when choose the type of technologies acquired in practice.Considering the foreign scholars usually conclude that complementary technology could increase the innovative performance of acquiring firms, and one of the results of this research indicates that complementary technology acquired could destroy shareholder value of acquiring firms in the long term, based on resource based theory, knowledge relatedness analysis and the integration theory of M&A, this dissertation develops a model to examine the key factors influencing value creation of related technology M&A. The research finds that complementary technology could create more value than similar technology for shareholders of acquiring firms in the long term, but the ratio of R&D employees and the ratio of target firm acquired have positive moderating effects on the relationship between complementary technology and long-term shareholder value of acquiring firms. The research also finds that M&A experience of acquiring firms before the M&A deal is positive related to the post-M&A shareholder value of acquiring firms in the long term. The results of the research indicate that complementary technology could not increase shareholder value of acquiring firms simply after it is acquired, it increases shareholder value only when it is integrated with the technologies of acquiring firm effectively. Though complementary technology could create more value than similar technology, if the integration capability of acquiring firm is weak, acquiring complementary technology would destroy shareholder value of acquiring firms in the long term. The findings above promote the research about technology M&A, provide theoretical basis for the value creation of technology M&A and the practice of technology M&A.Using event study method to examine the effects of M&A on long-term shareholder value of acquiring firms, this dissertation finds the time lag of the changes of shareholder value after M&A. Along with other findings and conclusions of the research, this dissertation develops the M&A theory, provides new theoretical explanations and empirical evidences for the paradox of M&A, also provides theoretical and method basis for investment decision making of long-term investors in Chinese stock market. The achievements of the dissertation above will help firms in China get the resources required for firm development and integrate them effectively to promote the value of firms and industries substantially, which will contribute to the scientific and efficient economy escalation of China.