Takeovers and Acquiring-Firm Returns: Evidence from Finland 2003-2008

This study investigates how acquisition announcements affect the value of the bidder. The main purpose is to study the acquiring firm shareholder wealth gains in short and long-term. The sample consists of 290 acquisitions that were announced between January 2003 and December 2008. The acquiring firm returns are studied by examining the abnormal returns around the announcement. For the long-term analysis buy-and-hold abnormal returns up to 36 months following the announcement are calculated. The results indicate that the abnormal return to the bidder on the announcement day is 0,82%. However, in the long-term acquirers underperform relative to non-acquiring companies. The one, two and three year buy-and-hold abnormal returns are -8,9%, -14,7% and -25,9%, respectively. The results also show that the announcement day returns and long-term performance of the acquiring firm are independent. This suggests that the acquisitions alone do not explain the post-merger underperformance.