Abstract:
A KPMG survey in London found that 53% of mergers
and acquisitions destroy shareholder value (Brewis,
2000). Andrade, Mitchell and Stafford (2001) state that
two of the main objectives in corporate finance
research are the measurement of value creation or
destruction through mergers and acquisitions, and how
this value creation or destruction is distributed between
the acquiring company and the target company.
The aim of this research is to determine whether large
acquisitions, concluded in 2001, 2002 or 2003 add
value to acquiring companies listed on the JSE Limited
(“the JSE”). The researchers examined the share price
performance of the acquiring company around the
acquisition announcement date and the impact on
operating financial performance in the two years
subsequent to the acquisition. These two most popular
measures are used to provide a comprehensive
analysis of the wealth effects of large acquisitions on a
sample of South African acquiring companies. In
contrast to the majority of international studies that
only consider mergers and tender offers where both
the acquirer and the target are publicly traded, this
study considers all mergers and acquisitions,
specifically including unlisted targets.
