Effects of Private and Public Canadian Mergers

Abstract

This paper examines the merger announcements of Canadian companies between 1994 and 2000 during an exceptional merger boom. The results show that both the target companies and the acquirer companies obtain significant positive abnormal returns during this time period. Companies that acquire private targets with stock have positive returns; however, acquirers of private firms have significantly higher risk compared with those that acquire public targets, despite nonsignificant differences in returns. Acquirers pay significantly less to acquire private firms than public firms, especially with stock. Overall, the findings suggest there is support for a liquidity discount for private firms, and the market is efficient in valuing firms in asymmetric conditions. Résumé Dans cet article, nous examinons les annonces de fusions des compagnies canadiennes entre 1994 et 2000, période de grand boom de fusion. Les résultats montrent qu'au cours de cette période, les compagnies cibles et les compagnies acquéreuses obtiennent des rendements anormaux positifs. Les entreprises qui achètent des cibles privées avec des actions ont des rendements positifs; cependant, ces entreprises ont des risques considérablement plus élevés par rapport aux entreprises qui achètent des cibles publiques nonobstant des différences négligeables dans les rendements. Par ailleurs, les acquéreurs paient nettement moins pour acheter les entreprises privées que pour acheter les entreprises publiques, en particulier celles qui ont des actions. Dans l'ensemble, les résultats de l'étude révèlent qu'il est nécessaire d'escompter la liquidité pour les entreprises privées et que le marché permet de valoriser les entreprises dans les conditions asymétriques.

The long-term performance of acquiring firms: A re-examination of an anomaly

“…16 Table 9 reveals significantly positive CARs around the announcement date. These findings are consistent with earlier Canadian studies such as Yuce and Ng (2005) and Ben-Amar and Andre (2006) but differ from some US results in which the ARs and CARS surrounding the announcement date are shown to be negative or insignificant. Possibly some features of the Canadian M&A market such as the larger relative size of target firms, the higher propensity of cash-financed deals, and the absence of strict anti-takeover regulations lead to positive ARs and CARs for shareholders of acquiring firms.…”

Gains to Merging Firms and Their Rivals: Evidence from Canada

“…Using a sample of 332 targets listed on the TSE, Eckbo and Thorburn (2000) calculate cumulative abnormal returns of 3.59% during the announcement month. Yuce and Ng (2005) also find a wealth creation for target firms' shareholders. They calculate cumulative abnormal returns of 7.69% over a five-day period around the announcement.…”

“…The literature on the Canadian M&A market argues that the gains experienced by acquiring firms are due to the weakness of anti-takeover regulations. Yuce and Ng (2005), using a Canadian sample of M&A between 1994 and 2000, find that the acquiring company shareholders earn significant and positive abnormal returns for a two-day holding period starting with the announcement day. Ben-Amar and André (2006) find that the announcement period abnormal returns for Canadian acquiring firms are positive over the 1998-2000 period and that the positive abnormal returns are greater for family controlled firms.…”

Impacts of Mergers and Acquisitions on Acquirer Banks’ Performance

“…Some studies (Krishnasamy, Ridzwa, & Vignesan, 2004;Sufian & Fadzlan, 2007;Rezitis, 2008) report decline in the operating efficiency/ performances of the merged banks. Yuce & Ng (2005) using event study method investigate the effects of the M & A and observe abnormal returns on the target and acquirer firms' stocks. Other researchers (Andreou, Louca & Panayides, 2012;Alexandrou, Gounopoulos, & Thomas, 2014;Khanal, Mishra & Mottaleb, 2014) also observe positive effects of M & A on stocks' prices.…”