서강대학교

초록/요약

Mergers and acquisitions (M&As) have many objectives, including expansion of market share, reduction of cost burdens for IT related investment or R&D spending, and business supplementation. Ultimately, all of these objectives boil down to the improvement of earnings and financial condition. Also, Merger announcements have a significant impact on the affected industries and investors. Under the assumption of efficient markets, in general, if a merger raises expectations of business results, stock prices should rise to reflect the change in expectations and vice versa. So, the hypothesis in the study is that ‘Does M&A create value in Korean companies?’ To test the hypothesis, market evaluation will be estimated by comparing the acquiring firms’ q-ratios prior to and immediately after the merger announcement for the time period 2005-2006. The result is that mergers in 2005-2006 increased q-ratios, that is, the merger announcement positively affected the acquiring companies’ stock prices. The next step will be to determine whether the operating result of the acquiring firm actually improved; this will be calculated by comparing the absolute changes of what happens prior to and right after the acquisitions in terms of return on equity(ROE), return on assets(ROA), and profit margin. The results indicate that the acquiring firms’ performance was not improved by mergers that occurred during 2005-2006 even though stock prices increased. Even though there is not much a company gains from mergers, the reason why many companies pursue mergers is purely due to the illusions; a lot of deals happen because managements fancy the idea of the deal. Excess cash accumulates when the economy is expansionary and managers tend to expend cash on mergers rather than long term investments. Hence, it is risky for an acquirer to initiate mergers during an expansionary period as it is rare to buy a target at a reasonable price. In Korea, two companies, acquired and acquirer, engage in mergers to grow by creating synergy. However, this study figures out that mergers in 2005-2006 did not create synergy in terms of merged companies’ performance even though mergers increased their stock prices. The change in stock price is measured the very minute the merger is announced, on the other hand, the change in company performance is estimated for two years before and after the merger announcement. So, we can conclude that mergers in 2005-2006 did not take effect as much as market expectations at the time of the merger announcement. This result explains the importance of a post-strategy. A post-strategy in M&A is very important to make an acquiring company’s performance improve. If there is no proper post-strategies, M&A can not create synergy even though market expectation is positive. For these reasons, managers should have proper post-strategies and should carry them out to maximize M&A’s utilities.