Measuring the Economic Gains of Mergers and Acquisitions: Is it Time for a Change?

Antonios Antoniou
Wealth Associates

Philippe Arbour
Lloyds TSB Corporate Markets

Huainan Zhao
Cranfield University – School of Management

March 2011

Abstract:

In this paper we review the methods of measuring the economic gains of mergers and acquisitions (M&A). We show that the widely employed event study methodology, whether for short or long event windows, has failed to provide meaningful insight and usable lessons regarding the central question of whether mergers and acquisitions create value. We believe the right way to assess the success and therefore the desirability of M&A is through a thorough analysis of company fundamentals. This will require examining smaller samples of transactions with similar characteristics.

Measuring the Economic Gains of Mergers and Acquisitions- Is it Time for a Change?