Shareholders' wealth maximization effect of mergers and acquisitions.
Loading...
Date
2003
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
In this study the effect of mergers and acquisitions on the wealth of shareholders is investigated by a case study method. The merger between Abraxas Investment Holdings and AST Ltd to form AST Group Ltd is investigated to establish any form of gains accruing to the shareholders whether abnormal or otherwise as a result ofthis merger. Two methods have been used to undertake this exercise namely the Stock Price Analysis and the Accounting data method. The accounting data method depicts an improvement in the post merger performance of AST Group Ltd as indicated by increases on the ratios such as Revenue; ROE; NAV and EPS. Improvement on these ratios has been interpreted as inferring an improvement on the "alue of the shareholders wealth. On the other hand the stock price performance analysis depicts two scenarios. Shareholders do experience some abnormal gains in the period leading to the merger as measured by increases in the share prices ofmerger companies. In the post merger period the price of AST Group Ltd Share declines unabated thus signaling a drop in the value of shareholders wealth. This has also resulted in incessant decline in PIE ratios in the post merger period. It has been concluded from this study that ifthe results of the investigation as outlined above are anything to go by then shareholders have not reaped the best possible results from this merger. AST Group Ltd has huge potential and capacity to afford its shareholders the best returns both in terms ofbook value and market value returns. A review ofthe integration strategy and appraisal of corporate objectives is required for this company to regain the confidence ofthe markets. AST Group Ltd needs to urgently arrest the decline in its share price or it will be exposed to a takeover bid soon
Description
Thesis (MBA)-University of Natal, 2003.
Keywords
Stocks., Mergers and acquisitions., Theses--Business administration.