Large Wealth Creation in Mergers and Acquisitions

Abstract

We examine completed mergers and acquisitions (M&A) deals with large acquirer shareholder dollar wealth gains at announcement. We find that large-gain acquisitions are: 1) typically “bolt-on” deals that are small relative to the acquirer's size, 2) transaction-specific events (not firm- or chief executive officer (CEO)-specific events), 3) enhanced by synergies of the merged firm, and 4) executed by bidders with high valuation multiples. These findings provide important insight into the factors associated with considerable wealth creation for acquirer shareholders in M&A deals.