Method of Payment in Mergers and Acquisitions: The Case of Saudi Arabia

2018 ◽  
Author(s):  
Nadisah Zakaria ◽  
Kamilah Kamaludin ◽  
Alya AlKhalifa
Keyword(s):  
Saudi Arabia ◽  
Mergers And Acquisitions ◽  
Method Of Payment

Mergers and acquisitions: implications for acquirers’ market risk

2019 ◽  
Vol 45 (4) ◽  
pp. 545-562 ◽  
Author(s):  
Sailesh Tanna ◽  
Ibrahim Yousef
Keyword(s):  
Mergers And Acquisitions ◽  
Prior Experience ◽  
Systematic Risk ◽  
Cross Sectional ◽  
Content Type ◽  
Cash Payment ◽  
Increase Risk ◽  
Method Of Payment ◽  
Mean Differences ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of mergers and acquisitions (M&As) on acquiring company systematic risk using a global sample of 34,221 completed deals that occurred between the years 1977 and 2012, covering 163 countries and 85 industries. Design/methodology/approach Acquirers’ systematic risk (beta) is calculated using the capital asset pricing model. The change in acquirers’ beta post-merger is obtained using event study and tested for mean differences across various sub-categories of deals. Cross-sectional regressions are then performed to test several hypotheses relating to the impact of diversification, method of payment, target status and prior experience on acquirers’ risk. Findings For the overall sample, the evidence suggests that acquirers’ beta tends to increase post-merger, but only in cases where their pre-merger risk is relatively low in relation to the risk of the market. The authors also show that cash payment deals for publicly listed targets contribute to reducing acquirers’ risk while stock payment increase risk. Diversification, whether global or across industry, has no significant impact on risk. On the other hand, for serial acquirers, the risk is increased significantly with more M&As. Originality/value This study contributes in a unique way by providing global evidence on acquirers’ systematic risk using a very large and diverse sample of M&A deals and investigating not only the impact of diversification on risk but also of other deal characteristics (e.g. method of payment, target status, acquirers’ prior experience) which have not been previously examined.

scholarly journals Financial synergy in mergers and acquisitions. Evidence from Saudi Arabia

2014 ◽  
Vol 9 (2014) ◽  
pp. 182-199 ◽  
Author(s):  
Al Qudaiby Basmah ◽  
Muhammad K. Rahatullah
Keyword(s):  
Saudi Arabia ◽  
Mergers And Acquisitions

scholarly journals Does The Financing Decision Help To Understand Market Reaction Around Mergers And Acquisitions?

2014 ◽  
Vol 30 (2) ◽  
pp. 465 ◽  
Author(s):  
Houssam Bouzgarrou ◽  
Wael Louhichi
Keyword(s):  
Mergers And Acquisitions ◽  
Market Reaction ◽  
Common Law ◽  
Pecking Order ◽  
Internal Funds ◽  
Study Methodology ◽  
Specific Factors ◽  
Method Of Payment ◽  
The Difference ◽  
The Impact

Few studies distinguish between the method of payment and the means of financing in mergers and acquisitions. This paper aims to test if the financing means has incremental information beyond that contained in the payment means. To answer this question, we consider a sample of 265 deals undertaken by French listed acquires between January 1997 and December 2008. We decompose our sample according to the method of payment (cash, stock or mixed payment). The difference of means test shows that the impact of the three methods of payment is not statistically significant. In order to take the analysis further, we then broke our sample down according to both the method of payment and the means of financing (debt, equity or internal funds). The difference of means test, the event study methodology and OLS regressions reveal that takeovers financed by debt outperform those financed by other means of financing. These findings confirm the monitoring role of debt and support the pecking order preferences. Finally, our OLS regressions highlight that market reaction depends also on legal environment (common law vs. non common law) on acquisition characteristics such as deal size and on acquirer specific factors such as size and growth opportunities.

scholarly journals Probability of mergers and acquisitions deal failure

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sailesh Tanna ◽  
Ibrahim Yousef ◽  
Matthias Nnadi
Keyword(s):  
Mergers And Acquisitions ◽  
Event Study ◽  
Market Reaction ◽  
Abnormal Returns ◽  
Unique Contribution ◽  
Probit Regression ◽  
Shareholder Returns ◽  
Content Type ◽  
Method Of Payment ◽  
Deal Completion

Purpose The purpose of this paper is to investigate whether the probability of deal success/failure in mergers and acquisitions (M&As) transactions is influenced by a range of deal, firm and country-specific characteristics which tend to affect acquirers’ shareholder returns. The specific hypotheses under investigation relate to the method of payment (cash versus stock), target status (listed versus non-listed), diversification (domestic versus cross-border and industry-wide) and acquirers’ prior bidding experience. Additionally, the authors also investigate whether announced deals reflect an expectation about likelihood of deal completion. Design/methodology/approach The authors analyse the probability of deal success/failure in M&As by combining event study and probit regression-based methods. The authors use the standard event study methodology to calculate acquirers’ abnormal returns for up to 10 days before and after the announcement date. In the probit model, the dependent variable is the probability of deal i being failure depending on four sets of explanatory variables: method of payment, target status, diversification and acquirer bidding experience, along with a set of control variables. Findings The findings from event study confirm that market reaction is indifferent to whether announced deals are likely to be successfully completed or not, consistent with the efficient markets hypothesis. However, the results from cross-sectional, cross-country regressions confirm that the aforementioned deal characteristics, as well as certain firm and country level attributes do influence the likelihood of whether an announced deal is subsequently completed or terminated. Originality/value In examining whether the specific characteristics affecting the likelihood that M&A transactions, once announced, will ultimately succeed or fail, it seems natural to ask whether the market reaction at the time of deal announcement reflects an expectation regarding deal completion. This could be associated with specific deal or firm-level characteristics influencing shareholder returns or risk, and represents a unique contribution of this study, over and above the use of a global sample of M&A data. The empirical analysis investigates these issues by using an extensive, global sample of 46,758 M&A transactions from 180 countries and 80 industries, which took place between the years 1977 and 2012.

scholarly journals Firm location and the method of payment in mergers and acquisitions

2014 ◽  
Vol 21 (5) ◽  
pp. 317-324
Author(s):  
Dimitrios Koutmos ◽  
Wei Song ◽  
Si Zhou
Keyword(s):  
Mergers And Acquisitions ◽  
Firm Location ◽  
Method Of Payment
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