Mergers and acquisitions on the JSE: the impact on acquirer’s returns when merging with either private or public companies.
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Date
2019
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Abstract
Over the past years mergers and acquisitions have been the leading strategies for
expansion, growing the business as well as tapping into new markets. They are
commonly used as the preferred method of rapid growth as the companies merge
resources to create access to innovation and expanding the business.
The majority of empirical literature in the South African context focuses on stock
returns after the announcement of the mergers and acquisitions, as well as analysing
the method of payment, whether cash or issue of shares.
This research explored the impact of mergers and acquisitions on the shareholder
value of Johannesburg Stock Exchange listed acquiring companies when acquiring a
private company compared to acquiring a public company. The study analysed the
impact of a merger and acquisition announcement on the overall shares. The focus
point was analysing the difference in returns when an acquiring company acquired
control in a private company compared to when an acquiring company targeted a
public listed company.
A quantitative approach was utilised for the purpose of this research. An event study
methodology was used with three window day periods being used, namely 3 days, 21
days and 41 days. The research included companies that were involved in mergers
and acquisitions from 2011 to 2016 and the sample size was 94 companies. The
results indicated that the acquisitions of private companies had statistically significant
positive returns to the shareholders of the acquiring company. The acquisition of public
listed companies did not, however, add value to the shareholders as the returns were
not significant.
Description
Masters Degree. University of KwaZulu-Natal, Durban.