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| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | The Impact of Capabilities on M&A: A text-based Analysis of Public Announcements |
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| Institution | University of Zurich |
| Faculty | Faculty of Economics, Business Administration and Information Technology |
| Number of Pages | 35 |
| Date | 2014 |
| Abstract Text | Executive Summary Problem Statement Over the past four decades the academic and business worlds have devoted significant time and resources to gain a deeper understanding of the success factors in M&A. The recent spike in M&A activity has increased the volume and value of M&A to the pre-crisis level and its development is covered widely in the media and is studied extensively by researchers and investors. However, there is still no generally accepted framework as to how to evaluate the potential value M&A deals are able to deliver to acquirers. Indeed, various research studies show that mergers are value destructive and rarely live up to expectations. Bruner (2004) compiled results of research studies on the profitability of M&A activity over three decades. The research studies evaluated indicate that M&A deals on average deliver a premium to the target’s firm shareholders, while the picture for the acquirer’s shareholders remains mixed. Many transactions fail because of an absence of strategic fit, an overestimation of synergies, or an inability to integrate two different cultures. However, companies should consider M&A as a corporate necessity. The ability to select targets that fit strategically and exploit synergies more efficiently than their competitors will result in a competitive advantage in the long-term. Over the last few years, researchers from various fields have introduced new methods and approaches to the M&A field, and the evaluation of M&A in a behavioural context and qualitative studies are gaining popularity. The identification of profitability drivers and capabilities that matter in M&A allows a company to select targets strategically and adapt its M&A strategy to its own needs. This thesis tests the impact that capabilities and the tone of M&A announcements have on the share price of the acquirer. The complexity and difficulty of predicting the outcome of a merger or acquisition resulted in a reemphasis on the role of luck in the completion of successful M&A (Barney (1988)). However, is a successful merger really nothing more than a roll of the dice? The aim of this thesis is to evaluate the impact of capabilities within the context of M&A business in order to reject the hypothesis that the success of an M&A is simply random, and to show that the consideration of capabilities drives the success or failure of M&A. |
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