Corporate Restructure Activity: Investigation into Merger and Acquisition Mega Deals

Abstract

Mergers and acquisitions (M&As) are one of the most direct and dominant methods of corporate investment and have been investigated since many years. Deals with a large transaction value, or mega-deals, are not as common, but they play an essential role in the total value of M&As. This thesis aims to compare how mega-deals and non–mega-deals perform differently. Studies on mega-deals are limited and fail to compare many aspects. By studying deals announced between 1980 and 2018, this thesis analyses how mega-deals and non–mega-deals differ in selecting targets, post-acquisition performance, and affecting factors.

Generally, this thesis suggests that, though mergers, on average, receive negative market feedback, mega-deals significantly outperform non–mega-deals in the long run, but this pattern reverses on the short run. This result is inconsistent with past papers stating that massive acquisitions destroy value to some extent. In addition, many control variables seem to contribute to this scenario, especially the payment method, deal status, target publicity, and acquirer characteristics. Mega- deal acquirers prefer targets with a lower debt-to-equity ratio, and these acquirers’ leverage ratio undergo more significant changes.

Overall, mega-deals are distinct from smaller deals in many aspects. The results of this thesis provide a deeper understanding of mega-deals and explain why large deals destroy value on a massive scale.