The market impact of mergers and acquisitions on acquiring firms in the U.S.

Previous studies have examined acquiring firms undergoing mergers and acquisitions along with the impact that these events have on firm security prices.  These studies have had mixed results. Some indicate negative impact on stock prices while others conclude that there is a positive effect. This study extends these previous studies by increasing both the number of firms sampled and the years evaluated. The first finding indicates that when acquiring firms are compared to firms not engaged in M&A activities, the acquiring firms’ stock price effect is significantly negative, while the non-M&A firms’ stock price effect is significantly positive. When the acquiring firms are evaluated by industry membership, findings suggest that firms engaged in M&A activities in all industries evaluated exert a significantly negative effect on stock prices, with the exception of the oil and gas industry along with the banking and financial services industry. These two industries were found to have a significantly positive effect on stock prices. These findings are important because they provide investors, managers and others with additional insight to the effects of mergers and acquisitions, from the acquiring firm’s perspective, on security prices. This study indicates that firms in certain industries may be more positively impacted, from a stock price perspective, than firms in other industries.   Key words:  Mergers, acquisitions, security prices, acquiring firms.