Читать книгу Applied Mergers and Acquisitions - Robert F. Bruner - Страница 58

A second important stream of research on M&A returns is found in 15 studies of profit margins, growth rates, and returns on assets, capital, and equity, summarized in Exhibit 3.8. Scanning the column of results yields the observation that two studies report significantly negative performance postacquisition, four report significantly positive performance, and the rest are in the nonsignificant middle ground. Four studies illuminate interesting aspects of postacquisition performance.

Geoffrey Meeks (1977) explored the gains from merger for a sample of transactions in the United Kingdom between 1964 and 1971. This study draws upon a relatively large sample (233 observations), and tests the change in profitability following the merger. Meeks looks at the change in return on assets⁸ (ROA) compared to the change in ROA for the buyer’s industry. His chief finding is excerpted in Exhibit 3.9. Meeks’ findings reveal a decline in ROA for acquirers following the transaction, with performance reaching the nadir five years after. For nearly two-thirds of acquirers, performance is below the standard of the industry. He concludes that the mergers in his sample suffered a “mild decline in profitability” (page 25).

Mueller (1980) edited a collection of studies of M&A profitability across seven nations (Belgium, Germany, France, Netherlands, Sweden, United Kingdom, and United States). All the studies applied standard tests and data criteria and therefore afford an unusually rich cross-border comparison of results across parts of Europe and the United States. The research tested theories about changes in size, risk, leverage, and profitability. Profitability was measured three ways: (1) profit divided by equity; (2) profit divided by assets, and (3) profit divided by sales. The changes in profitability for an acquirer (measured as the difference between the postacquisition performance and the average profitability for five years before the transaction) were compared to similar measures for two benchmark groups: firms matched on the basis of size and industry and who made no acquisitions, and a general sample of firms that neither made acquisitions nor were acquired during the observation period. Consistent with Meeks’ finding, Mueller’s work finds that acquirers are significantly larger than targets, acquirers have been growing faster than their peers and than their targets, and are more highly leveraged than targets and peers. Regarding profitability, acquirers show no significant differences—the specific data for the United States are generally representative of the findings across many nations. Exhibit 3.10 on page 53 gives an excerpt of these findings.

EXHIBIT 3.7 Summary of Shareholder Return Studies for M&A: Combined Returns to Shareholders of Acquiring Firm and Target Firm

Study	Cumulative Abnormal Returns	Sample Size	Sample Period	Event Window (Days)	% Positive Returns	Notes
Halpern (1973)	+$27.35 MM	77	1950–1965	(–140,0)	N/A	Mergers.
Langetieg (1978)	0%	149	1929–1969	(0,60)	46%	Mergers; uses effective date as event baseline.
Firth (1980)	–£36.6 MM	434	1969–1975	(–20,0)	N/A	U.K. acquisitions.
Bradley, Desai, Kim (1982)	+$17 MM	162	1962–1980	(–20,5)	N/A	Tender offers; referenced through Jensen, Ruback (1983).
Bradley, Desai, Kim (1983)	+$33.9 MM	161	1963–1980	(–20,5)	N/A	Referenced through Weidenbaum, Vogt (1987).
Malatesta (1983)	+$32.4 MM*	30	1969–1974	(–20,20)	N/A	Mergers.
Varaiya (1985)	+$60.7 MM	N/A	N/A	(–60,60)	N/A	Referenced through Weidenbaum, Vogt (1987).
Bradley, Desai, Kim (1988)	+$117 MM (7.43%)*	236	1963–1984	(–5,5)	75%	Tender offers only; subperiod data available for 7/63–6/68, 7/68–12/80, 1/81–12/84; combined returns have not changed significantly over time.
Lang, Stulz, Walkling (1989)	+11.3%*	87	1968–1986	(–5,5)	N/A	Tender offers only.
Franks, Harris, Titman (1991)	+3.9%*	399	1975–1984	(–5,5)	N/A	Mergers and tender offers.
Servaes (1991)	+3.66%*	384	1972–1987	(–1,close)	N/A	Mergers and tender offers.
Bannerjee, Owers (1992)	+$9.95MM	33	1978–1987	(–1,0)	N/A	White knight bids.
Healy, Palepu, Ruback (1992)	+9.1%*	50	1979–1984	(–5,5)	N/A	Largest U.S. mergers during period.
Kaplan, Weisbach (1992)	+3.74%*	209	1971–1982	(–5,5)	66%	Mergers and tender offers.
Berkovitch, Narayanan (1993)	+$120 MM*	330	1963–1988	(–5,5)	75%	Tender offers only.
Smith, Kim (1994)	+8.88%* +3.79%*	177	1980–1986	(–5,5) (–1,0)	79.1% 73.8%	Tender offers only.
Leeth, Borg (2000)	+$86 MM	53	1919–1930	(–40,0)	56.6%	In 1998 dollars.
Mulherin (2000)	+2.53%*	116	1962–1997	(–1,0)	66%	A sample of incomplete acquisitions.
Mulherin, Boone (2000)	+3.56%	281	1990–1999	(–1,+1)	N/A
Houston et al. (2001)	+0.14% (1985–1990) +3.11%* (1991–1996) +1.86%* all	27 37 64	1985–1996	(–4,1)	N/A	Deals in which both parties are banks.
Beitel et al. (2002)	+1.2%*	98	1985–2000	(–1,0)	65%	Sample of European bank mergers.
Fan, Goyal (2002)	+1.9%*	2,162	1962–1996	(–1,+1)	N/A
Kuipers, Miller, Patel (2003)	+2.99%*	120	1982–1991	(–1,0)	N/A	Foreign acquirers and U.S. targets.
Gupta, Misra (undated)	+7.06 MM	393	1980–1998	(–1,0)	53%	Sample of acquirers and targets in the financial sector.

Unless otherwise noted, event date is announcement date of merger/bid.

*Significant at the 0.95 confidence level or better.

EXHIBIT 3.8 Summary of Studies of Financial Statement Data

Author, Sample Period, and Sample Size	Major Findings
Meeks (1977) 1964–1972 233 mergers	ROA for acquiring firms in the United Kingdom consistently declined in postmerger years.
Salter, Weinhold (1979) Sample period unknown 16 acquirers	Average ROE for acquirers was 44% below the NYSE ROE, and the ROA was 75% below the NYSE.
Mueller (1980) 1962–1972 287 mergers	Using measures such as ROE, ROA, and ROS, U.S. firms engaging in merger activity were less profitable, although not significantly so, than comparable firms. Similar conclusions were reached for representative European countries.
Mueller (1985) 1950–1992 100 firms involved in mergers	The largest 100 firms in the United States involved in merger, both conglomerate and horizontal, suffer significant losses in market share.
Ravenscraft, Scherer (1987 article) 1950–1977 471 mergers	Significant negative relationships between operating ROA and tender offer activity. Other things being equal, firms with tender offer activity were 3.1% less profitable than firms without the activity.
Ravenscraft, Scherer (1987 book) 1950–1977 471 mergers	ROA declined on average 0.5% per year for target companies that were merged under pooling accounting.
Herman, Lowenstein (1988) 1975–1983 56 hostile takeovers	ROC for acquirers (using tender offers) increased from 14.7% to 19.6% postmerger in 1975–1978. A similar measure for the 1981–1983 period showed a decrease in ROC.
Seth (1990) 1962–1979 102 tender offers	Using a modeled (rather than a market) value of equity based on expected cash flows and a required rate of return, acquisitions returned 9.3% in additional equity value. Operational synergies, in the form of additional cash flows, returned 12.9%, and financial synergies, from changes in the required rate of return, were –3.6%.
Healy, Palepu, Ruback (1992) 1979–1984 50 mergers	In 50 largest U.S. mergers, merged firms showed significant abnormal improvements in asset productivity (asset turnover), but no significant abnormal increases in operating cash flow margins.
Chatterjee, Meeks (1996) 1977–1990 144 mergers	Before 1985, U.K. mergers showed no significant increase in profitability after merger. Between 1985 and 1990, firms showed significant improvement in accounting profitability returns (13–22%) in years following merger, presumably because of changes in accounting policy.
Dickerson, Gibson, Tsakalotos (1997) 1948–1977 613 mergers	For the first five years, postacquisition, ROA for acquirers is 2% lower than ROA for nonacquirers.
Healy, Palepu, Ruback (1997) 1979–1984 50 mergers	Based on the 50 largest U.S. mergers, operating cash flow returns as a result of merger met but did not exceed the premium paid for target; therefore M&A is a zero net present value (NPV) activity. Stock price activity at time of announcement was related to postacquisition cash flow performance.
Parrino, Harris (1999) and Parrino, Harris (2001) 1982–1987 197 mergers	Buyers experienced a significant +2.1% operating cash flow return after merger. This return is defined as operating cash flow divided by market value of assets. Postmerger returns were significantly higher where the buyer and target shared at least one common business line, or merged to take advantage of technology.
Ghosh (2001) 1981–1995 315 mergers	Buyers experienced returns on assets no different from a control sample following acquisitions. But cash flows increased significantly following acquisitions made with cash, and declined for stock acquisitions.
Carline, Linn, Yadav (2001) 1985–1994 86 mergers	Buyers and targets, combined, underperformed their industry peers in five years before merger, and outperformed their peers in five years after. Median change in performance of industry adjusted operating cash flows was +6.39%.*
Sharma, Ho (2002) 1986–1991 36 mergers, Australian sample	Comparing the three years before merger to the three years after, buyers showed significantly lower return on equity, return on assets, profit margin, and earnings per share.

ROE = Return on equity.

ROA = Return on assets.

ROS = Return on sales.

ROC = Return on capital.

*Significant at the 0.99 confidence level.

EXHIBIT 3.9 Excerpted Findings about the Change in Profitability of British Acquirers Following Acquisition

	Change in Profitability versus Industry and versus Predeal Performance	Percentage of Observations in Which Change in Profitability Is Negative
Year of transaction	0.148*	0.338†
Year +1	–0.015	0.536
Year +2	–0.010	0.517
Year +3	–0.058*	0.527
Year +4	–0.098*	0.660†
Year +5	–0.110*	0.642†
Year +6	–0.067	0.523
Year +7	–0.073	0.619

*Significantly different from zero at 1%.

†Significantly different from 0.5 at 5%.

Source: Meeks (1977), page 25.

The main observation from Mueller’s findings is that acquirers reported worse returns in the years after acquisition than their nonacquiring counterparts—but not significantly so. The most strongly negative results are shown in the right-hand column, notably in the low percentage of the sample that offered a positive comparison. Commenting on the results for all seven countries, Mueller wrote:

No consistent pattern of either improved or deteriorated profitability can therefore be claimed across the seven countries. Mergers would appear to result in a slight improvement here, a slight worsening of performance there. If a generalization is to be drawn, it would have to be that mergers have but modest effects, up or down, on the profitability of the merging firms in the three to five years following merger. Any economic efficiency gains from the mergers would appear to be small, judging from these statistics, as would any market power increases. (Page 306)

Ravenscraft and Scherer (1987) studied 471 acquirers between 1950 and 1977. The novelty in this study was the reliance of the researchers upon a special line-of-business database maintained by the Federal Trade Commission that would permit greater definition of control groups than in previous studies, and more careful assessment of asset values and the impact of accounting method choices. The drawback to the line-of-business focus is that acquisition synergies might occur in other areas of the acquiring firm, and therefore might be missed by this study. Also, the comparison in postmerger years is undermined by misalignment with the merger year.⁹ The researchers considered the ratio of operating income to assets. Strengthening the analysis are controls for industry effects, accounting method choices, and market shares. Their principal finding is that profitability is one to two percentage points less for acquirers than for control firms—these differences are statistically significant. Purchase accounting and the entry into new (i.e., diversifying) lines of business are associated with material and significant decreases in profitability.

EXHIBIT 3.10 Excerpts of Findings about Change in U.S. Acquirers’ Profitability Following Acquisition

	Acquirers: Three Years after versus Five Years before Compared to Two Control Group Companies (% Difference/% Positive)	Acquirers’ Postmerger Performance Compared to Their Base Industry Peers (% Difference/% Positive)	Acquirer’s Postmerger Performance Compared to a Projection of Performance Based on a Control Group and Industry Trends (% Difference/% Positive)
What it means	Change in profitability of acquirers compared with a randomly selected nonacquiring firm.	Change in profitability of acquirers compared with a nonacquiring firm matched on size and industry.	Change in profitability of acquirers compared with what it would have been if they had followed industry trends.
Pretax
Return on equity	–0.084	53%	–0.128	48%	–0.065*	3%†
Return on assets	–0.038	53%	–0.049	34%	–0.045	3%†
Return on sales	–0.029	60%	–0.034	48%	–0.038	3%†
After tax
Return on equity	0.011*	57%	–0.002	55%	–0.065†	4%†
Return on assets	0.003	57%	–0.001	31%	–0.002	17%†
Return on sales	0.003	70%‡	0.002	58%	–0.001	10%†

*Indicates significance at 2% level.

†Significance at 1% level.

‡Significance at 5% level.

Source: Mueller (1980).

Healy, Palepu, and Ruback (1992) studied the postacquisition accounting data for the 50 largest U.S. mergers between 1979 and mid-1984, and use industry performance as a benchmark against which acquirers’ performance may be tested. Asset productivity improves significantly for these firms following acquisition, which contributes to higher operating cash flow returns relative to their nonacquiring peers. Acquirers maintain their rates of capital expenditure and R&D relative to their industries, suggesting that the improved performance is not at the expense of fundamental investment in the business. Most importantly, the announcement returns on stock for the merging firms is significantly associated with the improvement in postmerger operating performance, suggesting that anticipated gains drive the share prices at announcement.