MEASURING THE STOCK RETURNS OF TELECOMMUNICATIONS AND INTERNET COMPANIES BY STUDYING THE EFFECTS OF FREQUENT MERGERS AND ACQUISITIONS.
MEASURING THE STOCK RETURNS OF TELECOMMUNICATIONS AND INTERNET COMPANIES BY STUDYING THE EFFECTS OF FREQUENT MERGERS AND ACQUISITIONS.

Author: Leen Obeidat

Publisher:

Published: 2018

Total Pages:

ISBN-13:

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This research paper aims to analyze a popular investment strategy in the technology and telecommunications market sectors. Over the years, it has been evident that many companies in these industries believe that the larger they grow in size, the better. This study challenges that notion by assessing the effect of frequent mergers and acquisitions on market capitalization and comparing the results of companies that merge and acquire frequently with comparison companies that do so less frequently.The hypothesis undergirding this thesis research is to see whether there is a difference between companies that frequently acquire or merge with other companies and those that do not. For the purposes of this study, the median split method was utilized to divide the largest companies within two market sectors (technology and telecommunications) into two groups and assess the change in market capitalization over a ten-year period. Then correlation and regression methods were used to further analyze the data.This analysis focuses on the largest wireless providers and the largest Internet companies by total revenue in the United States in the fiscal year 2016-2017. The analysis captures performance data from 2007 until 2017. After studying these, it is concluded that contrary to the dominant narrative that frequent mergers and acquisitions are good for business, there is no clear difference between high and low M&A investment strategy on market capitalization. Companies in both industries performed well in some instances and not very well in others. These findings raise questions about the popular notion that growing larger in these industries is a road to success, but rather that each company should customize its strategy to fit its needs.

Analysis and Evaluation of Success Factors and Synergistic Effects in M&A Transactions in the Technology, Media and Telecommunication Industry
Analysis and Evaluation of Success Factors and Synergistic Effects in M&A Transactions in the Technology, Media and Telecommunication Industry

Author:

Publisher: GRIN Verlag

Published: 2017-08-30

Total Pages: 58

ISBN-13: 3668513066

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Bachelor Thesis from the year 2017 in the subject Business economics - Investment and Finance, grade: 1, , language: English, abstract: Mergers and acquisitions are one of the most used opportunities to combine businesses and achieve growth inorganically, despite a high failure rate. The main motive during transactions is the realization of synergies. To achieve those synergies, the mechanisms of those effects need to be evoked by certain success factors during the post-merger integration. A post-merger integration that is executed incorrectly is one of the main reasons why transactions go fail and synergies are not achieved. This thesis will examine synergies and success factors for the post-merger integration of mergers and acquisitions in the technology, media and telecommunication industry, focusing on the acquisition of Time Warner Inc. by AT&T Inc. The technology, media and telecommunication industry is currently flourishing, which is evidenced by an increasing number of transactions. Nevertheless, wireless and mobile giants like AT&T are under huge pressure in their traditional barriers of business and therefore depend on a new strategy to diversify outside their traditional barriers of business. For this purpose, AT&T aims at generating further growth in the video and entertainment market through the acquisition of Time Warner. AT&T would not only increase their growth but they would also build up a second foothold since their traditional business is stagnating. AT&T will become the leader in converging technology, media and telecommunication.

Impact of Merger and Acquisitions on Stock Returns
Impact of Merger and Acquisitions on Stock Returns

Author: Dr. Amir Rafique

Publisher:

Published: 2013

Total Pages: 32

ISBN-13:

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Mergers and acquisition are not only related to accounting measures of performance of firms but it also affects the wealth of shareholders either positively or negatively. According to Hubris hypothesis, the merger and acquisition announcement brings negative effect to shareholders wealth and decreases the abnormal return in post period. The present study took this analysis separate for long and short run period. To capture immediate effect on shareholders return study used Market Model to calculate abnormal returns and employed the t-test on it to check the significant differences in two sample data set. Out of 12 cases of M&A eight mergers showed negative abnormal returns for post period with statistical significance at 1% level, two at 5% and two acquiring firms reduced returns were not statistically significant. Overall on the basis of most of M&A results, the study concluded consistent results with earlier studies. The long run analysis employed by using Ohlson (1995) model for firm value with introducing dummy variable for the pre and post period. The results indicated coefficient of dummy for merger was -0.52 with statistical significance at 1% level which is demonstrating negative effect on share price which ultimately reduces the returns. The study concluded that merger and acquisition announcement bring negative effect on shareholders return either for short run or long time period.

Merger and Acquisition Performance Measured Through a Characteristic-based Benchmark
Merger and Acquisition Performance Measured Through a Characteristic-based Benchmark

Author: Fadi Sami Chlah

Publisher:

Published: 2008

Total Pages: 98

ISBN-13:

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Post- Merger and Acquisition stock performance has been extensively examined, an d results have been mixed. Anomalies in finance lead to imprecise results, espec ially for long-term performance measurements. Methodological errors, length of t ime and the use of improper control models or examined samples can be the result of the misinterpretation of the performance of firms engaging in merger or acqu isition deals. Market- and accounting-based studies of long-term stock performan ce yielded conflicting results; moreover, these studies have been subjected to c riticism for the use of improper methodologies. In this paper we used a new benchmark constructed initially by Daniel, K., Grinb latt, M., Titman, S., and Wermers, R. (1997), known as the characteristic-based benchmark. This benchmark is based on size, book-to-market ratio and momentum. T his allows measuring the abnormal performance with a characteristic-based approa ch that provides better estimates of expected returns than those provided by fac tor sensitivities analysis. We examined one- to five-year abnormal performance for overlapping and non-overl apping mergers; the abnormal returns for all the five years examined were negati ve. We found an overall severe underperformance for all bid characteristics with an increasing magnitude each year, reaching -45% for the five-year period. Ther eby, it seemed that investment by acquiring or merging with other firm(s) does n ot create any value to acquirers' shareholders, regardless of type and deal char acteristics.

The Impact of Mergers on Performance in the US Telecommunications Industry, 1988 to 2001
The Impact of Mergers on Performance in the US Telecommunications Industry, 1988 to 2001

Author: Sumit K. Majumdar

Publisher:

Published: 2012

Total Pages: 0

ISBN-13:

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Mergers and acquisitions in the Telecommunications industry have become a distinctive trend of the U.S. economy, with steady consolidation of carriers to head off or take on the competition. While the wealth effects of mergers have been extensively analyzed in prior literature, previous studies fail to correctly relate the causes of such phenomena to ex-post performance. This study elaborates on the consequences of mergers and acquisitions in the telecommunications industry using statistics of communications common carriers for the period 1988 to 2001. Using a dynamic panel data analysis estimation technique - Arellano-Bond (1991) estimation -, which outperforms the event studies methodology used predominantly in prior research, we examine the synergistic effects and success factors of mergers over time with an exhaustive set of financial, operational and technological performance measures that capture profitability, growth, efficiency, productivity, economies of scale and scope, and technology progressiveness. We control for critical periods that constitute structural shift in telecommunications merger and acquisitions activity, and account for many mergers with huge welfare implications. The results of this study will serve to project the future structure of the telecommunications industry. We find significant evidence that mergers are followed by substantial deterioration in profitability and operational performance, in addition to a significant decrease in the investment on new technology.

Quest for Efficiency
Quest for Efficiency

Author: Sumit K. Majumdar

Publisher:

Published: 2009

Total Pages: 61

ISBN-13:

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We evaluate the impact of the various mergers of the local exchange companies that took place between 1988 and 2001 on several measures of performance of the firms that have undergone the mergers. Our analysis reveals that relative cash flows decrease after mergers, the pattern of accompanying sales growth is ambiguous and driven by increased market presence while the impact of mergers on the measures of efficiency and synergy are negative. If the efficiency motive is primary in influencing merger approval, then the past mergers approved have led to inefficiencies and welfare losses for the American consumer and the mergers of communication common carriers have not been in the public interest. On the other hand, given the inefficiency outcomes views that the quiet life, hubris and a quest for possible market power have motivated the mergers cannot be discarded.

Mergers and Acquisitions in the U.S. Telecommunications Industry - An Empirical Analysis of Diversification Strategies, Influencing Factors and Their Performance Implications
Mergers and Acquisitions in the U.S. Telecommunications Industry - An Empirical Analysis of Diversification Strategies, Influencing Factors and Their Performance Implications

Author: Alexandre Robert Mounier

Publisher:

Published: 2017

Total Pages:

ISBN-13:

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The telecommunications industry is among the most dynamic industries in terms of mergers and acquisitions activity. Yet, only few studies have been concerned with the particular challenges and dynamics telecommunications firms face when engaging in takeover activity. This thesis addresses this gap and contributes to existing re- search by investigating influencing factors and their performance implications for mergers and acquisitions in the U.S. telecommunications industry. The analysis is conducted using a five-day event study methodology based on abnormal returns in combination with ordinary least squares and weighted least squares regressions. The evidence obtained suggests that on average, related acquisitions are expected to out- perform unrelated acquisitions with an underlying U-shaped pattern, and acquirer experience and acquisition timing also exhibit a curvilinear linkage to market expectations about firm performance. The results of this thesis emphasize the importance for managers to consider the particular setting of their acquisitions along with the need to clearly communicate how an acquisition fits into an overall corporate strategy, and how it is to be evaluated with respect to the competitive positioning of the firm.