Mergers and Acquisitions in a Global Context

Abstract

Using a global sample of mergers and acquisitions in 1998, this article examines the short-term reaction of stock prices and analysts' earnings estimates to the announcement of a merger or acquisition. Targets and merging firms outperform the market in the period before and on the day of the announcement. However, merging firms show a significant underperformance immediately there after. Moreover, we find a lack of upward revisions in consensus earnings estimates for the post-announcement years. This suggests that synergies are hard to find.