| Summary: | This paper examines the choice of payment methods in mergers and acquisition (M&A) and the associated post-acquisition performance based on a study of selected 129 transactions during 1990 and 2008.
We find that the choice of payment methods is affected by a wide range of factors including company valuation, transaction size, management control, market expectation and stock valuation.
In addition, we also observe a significant relationship between payment methods and post-acquisition returns from a long-term perspective. Consistent with most previous evidence, we find that cash payment will contribute to the highest post-acquisition returns to the shareholders of the acquiring firms. On top of that, it is further explored that merger types also have impact on the post-acquisition performance. According to our results, only conglomerate acquisitions tend to contribute positive shareholders value; by contrast, horizontal and vertical mergers are highly unprofitable.
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