Merger and Acquisition In the short-run empirical evidence suggests that acquisitions have, at best, an insignificant impact on shareholder wealth (Firth, 1980). In the long-run there is overwhelming evidence of negative returns (Sudarsanam and Mahate,

Section 1.1. Event Studies

In empirical literature, the effect of merger and acquisition events can be measured by changes in company stockpile during the event time. Martynova et al. (2007) report that event studies are significant tools that offer evidence on how prices respond to dynamic market information in addition to finding changes in partaking prices as a function of a merger and acquisition. According to Pawaskar (2001) event studies become a superior approach to measure returns compared to abnormal return analysis because it provides top estimates of the company’s value after an acquisition. Brown and Da Silva (2001) add that event studies can effectively measure returns since they use announcement effects as a guideline, such as dividend announcement, stock splits, and merger announcements. Previous literature on a merger and acquisition has shown that acquisitions affect the value of the merging companies and may generate either negative or positive abnormal returns (Ghosh, 2001). In the current context, abnormal return refers to the variation between the expected return compared to the actual return on an investment. If the actual return is higher than the expected return, then the merging firms have abnormal positive return, however, if the actual return is lower than the expected value, then the firms are said to have an abnormal negative return (Tichy, 2001).

Section 1.2. Empirical evidence based on short-term event studies

Evidence on the impact of a merger and acquisition on firm performance has been drawn from various short-term event studies. A number of studies have evaluated target firms and reported mixed results. For instance, a study by Mulherin and Boone (2000) has documented the impact of the short-term events on a target sample of 1305 firms using the net-of-market and the stock price data return for events observed from 1990 to 1999. For each of the firm sample, they track the acquisition and merger activity for bidder and target firms from 6 months (t=-24 weeks) before merger to determine if firms have significant abnormal returns in asset sales, equity carve-outs and net-of-market bidder return. On average, they report that the equity value of the target firm increases by 21.2% five days around the initial announcement of the acquisition. The authors state that the median abnormal return -6 weeks before merger is 18.4%. This significant positive return for target firms is significant from early research periods. Analysis of the abnormal firm returns for both bidders and targets +8 months post-merger reports that on average, the target companies accrue more than 20% around the date of the acquisition announcement. On their part, bidders obtain an insignificant change in mean wealth creation around the announcement acquisition. In absolute terms, the authors report that the median is insignificant though the estimates indicate significantly negative returns to the event window -6 to +8 months. For example, the net-of-market bidder return (-6 to 8 months) period was 0.65% abnormal positive return, although insignificant (t=0.91). These findings show small magnitude of bidder returns, and the authors state that one possible explanation for this is the competitive market for corporate control. In addition, 30 days prior to acquisition (t=-30 days), the results indicate a 3.56% combined bidder and target return, while 30 days post-merger (t=+30 days) the combined return is 5.12% showing a significant positive return from zero. The authors state that this positive combined shareholder wealth creation is consistent with a synergetic theory. Synergetic theory argues that merged firms are better positioned to experience wealth creation after merger compared to individual firms pre-merger. As such, the firm managers’ anticipation to create synergies appear to work in increasing the market share as indicated by the abnormal positive returns of 1.56% 30 days post-merger that is significantly positive from zero. From these findings, Mulherin and Boone (2000) add that on average, bidders have insignificant average return that is marginally negative at -0.38% in wealth creation once the acquisition announcement becomes public.

Morck et al. (1990) have reported that from a total of 326 US firm acquisitions analysed from 1975 to 1987, the results from the bidding firms were analytically lower and primarily showed abnormal negative returns during the period of the announcement returns, 3 months before merger and 3 months post-merger. These returns has been supported by Jarrel and Poulsen, (1989) who state that bidders obtain small returns, although they are statistically insignificant positive gains that range from 1% -90 days pre-merger to 2% 90 days post-merger. Morck et al. (1990) continue to add that the empirical evidence obtained from analysing their 326 merger and acquisition samples from 1975 to 1987 shows that the mean value generated from a 3-day event study on the announcement date to the bidder firm is -0.53% and this value is marginally negative although insignificant. The authors argue that the implications of these findings lies on their primary focus of the studies based on four bid characteristics of relative size, method of payment, hostility, and diversification. The interpretations mean that mergers and acquisitions are wealth creating events for combined, acquiring and target firms. In addition, these event studies reveal that there are positive market reactions by both the bidding and target shareholders in the short term towards the merger and acquisition announcements. The target- firms appear to create significant wealth (13%) for their shareholders +5 months post-merger compared to the bidding firms (3.12%) during the same period. These observations are as a result of economic conditions that surround merger announcements, paid premium, payment method, and status of failure industries engaged in the mergers and acquisitions. All these factors explain the short term wealth effects of the bidding and target shareholders during the merger and acquisition announcements in that while the bidding shareholders prefer equity offers, target shareholders prefer cash offers more than other payment methods (Ma et al., 2009). According to the scholars, the short term empirical findings of these event studies appear to give a mixed reaction to the success of a merger and acquisition on abnormal returns.

Section 1.3. Empirical evidence on long-term

For example, a long term acquirer return made by Gugler et al. (2003) has reported an acquisition announcement of -1.46% for all the long term diversifying acquisitions while the related acquisitions posted -1.56% in an event window of 4 years (-2 to -1 pre-merger period to +1 to +2 post-merger period). In addition, the combined target and bidder returns have been found to be 4.33% and 3.53%, respectively from -1 to +2 years. However, the difference are not significant when considering the divested acquisitions that posted abnormal negative returns of -2.06% for diversified acquisitions 2 years post-merger, compared to -1.43% for related acquisitions -2 years before merger where the combined bidding and acquirer returns is 4.24% and 3.25%, respectively. Yet again, the differences post-merger appear to have insignificant abnormal returns that are similar to the median returns from -2 to 2 years post-merger. Based on these findings, Gugler et al. (2003) explains that this is linked to the share price of target firms that appearing to drive up once the announcement of a merger and acquisition is made resulting in competitive advantage as firms indicate a market dominance resulting from monopoly leading to reduced competition and difficulty in market entry by competitors.

Mulherin and Boone (2000) have also investigated the long term impact of synergy between target and bidders in Canada. To attain their empirical evidence, they undertook a sample survey on 1,305 merger and acquisition firms from 1990 to 1999 where they have analysed the findings using a standard market model. The effect on wealth has been presumed and projected 18 months prior to the merger and acquisition announcements 30 months later (t=-18 months to t=30 months).

The findings from this empirical research document that in the long-term, the acquiring company experience a negative abnormal return of -2.13% during the date of announcement. In comparison, the target shareholders have been shown to enjoy positive abnormal return of 16.13% where from the period t=-18 to t=30 months, there is a high abnormal return of 14.28% that is enjoyed by the shareholders while the bidders firms incur a loss of -3.12%. These findings can be explained by the fact that the acquirers often experience improved asset production resulting in high operation cash-flow relative to their peers not engaged on mergers. The authors argue that in the long-term, consistent with the perception of economic change as a motive behind most firms’ restructuring activities, they report substantial industry clustering from the mergers and acquisitions. Following the announcements, the wealth creation effects are reported to be correlated to the size of the merger and acquisition deal. As such, they conclude that the methodical positive wealth creation if mergers and acquisitions are with the synergetic firm acquisition, but inconsistent compared to non-methodical models centred on hubris, entrenchment, and empire building.

Section 2: Empirical evidence based on accounting data on the impact of M&A on firm performance

Section 2. 1. Accounting data

Accounting data empirical studies have been used by some scholars as an effective tool that can be used to measure the true performance of a firm. The short-term and long-term firm performance is determined by different factors, such as firm size, method of payment, acquirer type, and benchmark model. As such, it is possible to evaluate different market factors using the accounting data (Franks and Harris, 1989). However, some sections of scholars such as Rau and Vermaelen (1998) have criticized the accounting data approach because it is perceived to be a difficult approach in making comparisons in addition to being an erroneous indicator of true performance.

Section 2.2. Empirical evidence on Accounting Data for the Short-term

Ghosh (2001) has examined the operating performance of firms after acquisitions. Using a research design proposed by Barber and Lyon (1996), Ghosh (2001) accounts for the firm’s post acquisition size and performance to determine if the cash flow performance improves after corporate mergers. Using a sample of large firm acquisitions from 1981 to 1995, Ghosh (2001) reports that the post-acquisition operating cash flow of the merged firms increase significantly. This increase occur when Ghosh (2001) uses the design employed by Healy et al. (1992). Healy et al. (1992) estimated the acquisition triggered cash flow improvement using this induced improvement as an intercept of the post-acquisition regression of the industry adjusted cash flow of the merging firms. However, the findings by Healy et al. (1992) have been criticized by Ghosh (2001) for using industry-median firms as the benchmark. After accounting for superior pre-acquisition performance, Ghosh (2001) fails to establish any evidence of improved operating performance by the merged firms. When control firms are matched on size and performance from pre-event periods, the cash flow of the firms, post-acquisition, does not increase. For the periods from year -1 to 3 (-1 to -3, 1 to 3), the median and mean increase in cash flow between post-acquisition and pre-acquisition periods is 0.27% and 0.66%, respectively. Nonetheless, these increase are not significant. That is, Ghosh (2001) argues that a comparison in pre- and post-acquisition period years fails to show any economical or statistical median or mean increase in the firms’ operating performance after the acquisitions. The median of difference between matched and merging firms is 0.73% for 1 year pre-acquisition (t=-1 year) and this value is not significant at the value of 10% level. In contrast, the corresponding post-acquisition median for the merged and matched firms is 1.19%. Ghosh (2001) concludes that similar to pre-acquisition year, the values of post-acquisition year the values are not statistically different from 0 at the 10% significance level. According to Ghosh (2001), although the median difference in performance between the matched and merged firms is insignificant at year -1, this can be considered large because his study matches on performance. This challenge results because the sample he used consist of large firm acquisitions. When considering the merged firms’ sales growth, the median difference for year -1 is 0% but increase to 8% in year +1. Ghosh (2001) elaborates that the sudden jump in the growth of sales in year 1 is potentially attributed to accounting reasons.

A study by Healy et al. (1992) examines 50 largest acquisitions from 1979 January to 1984 June. The scholars identify acquisition samples by checking 382 merger dealings from the CRSP database and 50 acquisitions from largest target firms from the NYSE. In measuring the firms’ performance, the authors use pre-tax operating cash flow on asset returns, because it presents the true wealth created by the assets. From year -1 to year +1, the changes in the firm’s cash flow rate is 14%. The cash flow change fails to show whether the merged firms have performed better in the post-merger period. In contrast, the firm’s asset growth rate between years -1 and +1 is 15%. In addition, the industry cash flow growth rate and industry growth rate for the same duration of year -1 to +1 is 10% and 20%, respectively. The overall median annual return is not statistically significant. The authors explain that given this results, post-merger performance is not affected by factors around superior pre-merger industry performance.

Section 2.3. Empirical evidence on Accounting Data for the Long-term impacts

In their study, Healy et al. (1992) have examined a sample of 50 acquisitions firms made between 1979 and 1983 in the US. Their data was randomly gathered from the large firm acquisitions recorded in the NYSE since there were no regulated companies in the market. The authors used the firms’ bidding and target adjusted performance as the benchmark to assess their post-merger performance. The performance improvement of these firms is done using the pre-tax operating cash flow return on assets to weigh the firms’ improvements. Since the actual economic benefits by the return on asset is critical in understanding the firm’s performance, the authors focused on cash flows by the assets used to form a return measure that can be compared across firms and across time. In this case, the accounting data on operating cash flow represent the sales, minus the cost of administrative expenses, cost of goods sold, goodwill expenses, and the depreciation value.

They find that the operating cash flow, after aggregating pre-tax operating cash flow, for the years before merger (t=-5 to -1 years) is 7%. In contrast, the post-merger cash flow for years 1 to 5 was 11%. Besides, the changes in cash flow and return on assets in years 1 to 5 post acquisition showed a medium increase in cash flow of 15% in year 1, 17.1% in year 2, 16.3% in years 3 and 4, and 9.3% in year 5. This growth in cash flow, however, fails to show that merged companies have performed any better compared to post-merger period since the return on assets increased during the same duration. The value of assets increases by 15.4% in the first year, 20% in the second year, 28.1% in the third year, 23.4% in year 4, and 18.3% in year 5. In assessing the change in market value of assets, the authors state that the measure of industry-adjusted return increases in the post-merger period if investors reduces their assessment of merged firms’ prospects in line with their firms. Since the authors have used the market value of equity in computing the return on assets, the post-merger decline in their equity findings will affect the measure of asset values.

However, holding the cash flow constant, like the reduction in asset values, is also likely to reduce cash flow returns. Findings from the merged firms show high cash flow returns on assets compared to the post-merged period. The median industry adjusted pre-tax return on assets is 2.8% in year 1, 2.6% in year 2, and 2% in year 3 and all these values are significantly different from zero. Entirely, the annual median pre-tax return on assets in the 5 years post-merger is 3.2%. In contrast to the pre-merger performance, the authors do not find a strong evidence of superior industry-adjusted pre-tax cash flow returns, or return on assets. In each of the pre-merger years, -5 to -1, the median return are not significant from zero as the overall annual premerger for the five year period is 2.1%, a value the authors argue to be statistically insignificant. The significant improvement in the return on assets can be explained by the high operating cash flow from the combined firms post-merger, an outcome of increased productivity in the assets of the merged firms.

According to Andrade et al. (2001), the improvement in cash flow post-merger can rise from various sources, including improved operating margins, lower labour costs, and greater asset productivity. Similarly, the increased firm performance arises from the assets with low turnover. From the current empirical literature on a merger and acquisition, it is significant to note that mergers have a substantial abnormal return for target and bidding firms. The experimental sourced from both short term and long term event studies indicate that most merger and acquisition cases create a positive wealth effect on the acquired firms’ shareholders. Example of these conclusions have been made by Kaplan et al. (1992), Mulherin et al (2000), Andrade et al. (2000), Graham et al. (2002), and Bhagat et al. (2005). These results can be interpreted to mean that the firms enjoy capital gain as a result of mergers and acquisitions. In comparison, other scholars have argued that although mergers and acquisitions contribute to positive wealth creation for the target firms, the acquiring firms appear to be on the losing end as propounded by Bradley et al. (1988), Mulherin and Boone (2000) and Servaes (1991). The reason for this outcome is that the acquiring firm often break even or experience a small gain while in other occasions; they even suffer significant abnormal negative returns (Mulherin & Boone, 2000). As a result, by examining the current empirical data from the event studies, and on the accounting data of the various mergers and acquisitions, in short term, is beneficial for both the bidding and target firms, although the outcome can be negative in the long term (Hackbarth & Morellec, 2008).

Section 3: Impacts of M&A on stakeholders with vested interest in the organizations

Extensive literatures written on the impact of a merger and acquisition on organizations’ stakeholders give different outcome on specific group of stakeholders. A merger or an acquisition has positive effects on some group of stakeholders and negative effects on others.

Section 3.1: Impacts of M&A on employees

There are always a number of reactions from employees when their organization decides to undergo a merger or an acquisition. Andrade, et al., (2001) stated that a period of redundancy usually takes place in the organization after the conclusion of a merger and acquisition; this could sometimes lead to some employees of the acquired firms being laid-off by the acquiring firm’s management. According to (Buono & Bowditch 2003) an extensive corporate restructuring might occur during a merger and acquisition that can contribute to the layoff of a number of employees regarding the closure of some plants and offices in the acquired firm, such exercise creates fear and stress of takeover among the employees.

Furthermore, a study by Loughran and Vijh (1997) has examined the effects of mergers on Finnish employees. They document that both cross-border and domestic mergers and acquisitions contribute to downsizing of employees in the manufacturing industries. These losses in employee jobs result from changes in ownership and internal re-organizations and restructuring. Chambers & Honeycutt (2009) have studied the moral and turnover intention of employees after merger and acquisition. It was found that low morale among employees result in higher job layoffs in merger and acquisition deals. On the other hand, employees who are retained in some cases experience a culture clash and conflict, as there are very few instances where organizations can share a similar culture, and it will take time for an employee to fit into their new environment (Buono & Bowditch 2003). Organizational culture conflicts are being recognised as one of the underlying determinants of a merger and acquisition failure, as it will result to an accumulation of stress levels in the workforce, and thereby it might lead to a poor performance and productivity in an organisation (Schuler and Jackson, 2001). As observed by Taguchi et al. (2012), in Japanese merger and acquisition deals, employees are negatively impacted by most mergers and acquisitions, with a concomitant   decline in productivity and job performance.

In order to avoid such instances of stress in the organisation, earlier planning for cultural strategic and internal communication channels should be well defined (Agrawal, et al., 1992).

Bruner (2005) added that the duration of change from the time an announcement is made to being taken over is always challenging for the employees, especially when they feel isolated from the change process. There is a likelihood of the development of anxiety and fear by the employees who are not aware of the impact the merger and acquisition will have on their employment status. The uncertainties among the employees resulting from a merger and acquisition would shift employees from productivity to interpersonal conflicts, thus reducing productivity and increasing concerns over job security (Schuler and Jackson, 2001).

However, merger and acquisition activity, in order to be best served, should be through the best use of HR exercises to ensure that the right selection, recruitment, compensation and labour interactions are employed (Schuler and Jackson, 2001).

Section 3.2: Impacts of M&A on shareholders

A number of literatures on a merger and acquisition by finance scholars have confirm similar result on a merger and acquisition impact on shareholders, these findings pointed to the shareholders of the acquired firms gaining excess return while that of the acquiring firms making loses.

According to Jensen and Ruback (1983), the shareholders of the acquiring firm may suffer losses in the event of a merger or an acquisition, due to overpayment, problem of integrating the acquired firm and the servicing of debt after the merger and acquisition, while target firm shareholders benefit in the short run. This is consistence with the findings of Agrawal et al (1992), which shows that acquiring firm shareholders make losses of up to percent of their market value in the first five years after mergers rather than making gains

Section 3.3: Impacts of M&A on bondholders

Indications from the finance literature maintain that bondholders experience significant wealth impacts from a merger or an acquisition. In this regard, some empirical evidence fails to detect much wealth effect. A study by Billett et al. (2004) has examined the wealth effects of a merger and acquisition on acquiring and target companies’ bondholders from 1980s and 1990s. Low credit investment bonds appear to earn positive wealth while the acquiring company bonds earn negative returns, that is, if the credit target rate is below than of the acquirer’s. This is because it empowers the acquiring bondholders to confiscate wealth from shareholders during merger and acquisition takeovers (André et al., 2004). Bruner (2005) holds that target bondholders can benefit from shifting to an acquirer that has a higher shareholding power. This report appears to support the claim that a stronger bondholder improves collateral and asset values that benefit its shareholders. In addition, government bonds are likely to have a positive impact post-merger and acquisition. As a number of scholars, such as Maquieira et al. (1998), and Billett et al. (2010) argue that mergers and acquisitions are likely to create wealth for bondholders if market volatility is reduced leading to a lower default risk. Billett et al. (2010) reports that mergers and acquisitions are one of the most valued and relevant market actions a company takes to protect bondholder wealth. They document that target bondholder wealth creation is estimated to increase by 5.77% and acquiring firms’ bondholders gain positive returns depending on the time period. If factors that affect bond prices such as interest rates and inflation are kept in check, then they are likely to amass wealth creation and give significant return to bondholders, meaning that the government is in a position to yield growth from bonds.

Similar claims have been made by Loderer and Martin (1992), when they report that a merger or an acquisition contributes 7.43% increase in the combined value of bondholder wealth creation post-merger.

Additionally, Bruner (2005) remarks that if the trustee monitors the issuing firm’s activities and ensures a high level of compliance with the terms of the indenture then the bondholders, in which the government is a major stakeholder, are certain to experience wealth creation. In contrast to the at higher risk returns of shareholders, the government is likely to benefit from its bondholding post-merger.

Section 3.4: Impacts of M&A on suppliers

Compared to other stakeholders, a merger or an acquisition has similar negative impacts on suppliers in line with the literature findings. In most cases, it appears like suppliers to the acquired company are likely to be affected negatively while those from the acquiring firm are likely to have positive returns. In the first 12 months, merger activities are likely to have significant impact on suppliers up to 10% rates on returns (Lehto & Petri, 2008). However, for the remaining period post-merger, there is little likely impact on suppliers on abnormal negative returns. Similar findings are also evident in short-term merger and acquisition studies. When assessing the foreign-based merger and acquisition targets, the supplier impact is statistically non-significant while cases of abnormal negative returns for all the supplier stakeholders are much lower. The reason for these findings as they stand is attributed to forces affecting supply and demand, such as financial flexibility of a company, consumer expenditure, wages, sensitivity to price changes, and output/input prices. Importantly, a positive consumer expenditure post-merger means that the domestic acquired business will operate under favourable economic environment compared to times when consumers are cautious about spending. Favourable economic conditions facilitate positive abnormal growth for the suppliers. These findings appear to suggest that cross-border based mergers and acquisitions are less likely to affect supplier interests who will benefit through the large production and competitive advantage. A number of reasons can explain for this competitive advantage, such as cultural differences in acquisition success, less transparent data in foreign based companies on pre-acquisition information, and the challenges of integrating a foreign company in the new environment (Andrade et al., 2001). According to Ravenscraft and Long (2000), most mergers and acquisitions and especially the cross-border deals increase the supplier wealth creation due to a higher competitive advantage resulting from such mergers and acquisitions.

Section 3.5: Impacts of M&A on customers

According to Gaughan (2010) most mergers and acquisitions are likely to affect employees and customers immediately post-merger. In most cases, merger and acquisition agreements leave customers dissatisfied and it can take years for the acquiring firm to recover and gain lost ground. Billett et al. (2004) adds that a data from the consumer satisfaction index on 28 British merger firms between 1997 and 2002 showed customers were unsatisfied on average after merger. This trend worsened even two years after the merger and acquisition deal where the customer’s satisfaction was affected by their perceptions about the companies’ product quality, pricing, and ability to meet consumer expectations. This is because consumers reported changes in normal product expectations on these three attributes after the merger and acquisition that fell short of the initial experience they enjoyed with the company before the acquisition. Agrawal and Walkling (1994) reported that 50% of the merger deals gave consumers a negative experience in industries that directly affected consumer lives. Some of these industries include cable-TV outfits, oil companies, and retail stores where customer satisfaction is likely to plunge between 5.3% and 7.4% post-merger (Gaughan, 2010). Since most post-merger operations are characterized by the elimination of some product lines with a focus on only the most profitable, for example, in the airline industry, the increased market dominance resulting through mergers therefor provides an incentive for organizations to exploit consumers through higher prices. These prices are generally maintained due to the unavailability of other substitutes or options in the market (Kim & Singal, 1993).

Despite the potential negative customer experience, some industries such as the pharmaceutical industries are likely to have positive customer experience after a merger and acquisition. For example, Sudarsanam and Mahate (2003), have reported that customers are in a position to enjoy competitive prices after merger compared to prices retailed by individual company monopoly. Another finding by Danzon et al. (2005) documents that a merger or an acquisition increases research and development of new medication formulations resulting in superior and better products for the target market. These sentiments, have also been supported by Ravenscraft and Long (2000) when arguing that customers often benefit from mergers and acquisitions as a result of enhanced productivity and better technological advancements resulting from firm mergers like in the technology and the pharmaceutics industries.

Sectiom3.6: Impacts of M&A on Government

Before any merger or an acquisition deal can be reached, the government(s) involved have an obligation of ensuring fair business by preventing small firms from the monopoly of large companies. Gaughan (2010) reports that among the primary provisions for a successful merger and acquisition in the U.S. and the EU is the antitrust laws designed to prevent anticompetitive mergers and acquisitions. Under the EU Competition Law and the US Hart-Scott-Rodino Act, the departments of Justice are mandated to review most of the proposed merger and acquisition deals might affect commerce as a result of lessened competition (DiLorenzo, 2005). According to Frum (2000) the government has a primary role in preventing cartels and collusions that act in restraint of an effective merger and acquisition trade. This argument reflects the notion by Gaughan (2010) that each business in a merger and acquisition deal has a right to act independently on the market so as to protect stakeholder interests, and so earn its profits mainly by providing quality products and better priced services compared to its competitors. For this reasons, the EU antitrust laws mandates the EU governments to prohibits every merger or an acquisition deal, combination in the form of conspiracy or trust, in restraint of commerce or trade (DiLorenzo, 2005).


The current financial literature has confirmed the continued state of academic controversy on a merger and acquisition. While a number of stakeholders are likely to enjoy the positive impacts of mergers and acquisitions, the findings from most studies reveal that a merger or an acquisition does not contribute to significant wealth creation. In some of the cases, the bondholders will often experience positive wealth creation (Billett et al., 2004). Cook and John (1991) adds that bondholder wealth creation post-merger increases by 7%, while Billett et al. (2010) places the figure at 5.77%. Additional studies indicate that mergers and acquisitions can have positive impacts on the customers in terms of improved product quality and technological improvement, as well as they can negatively impact the customers through increased prices in situations where the market is controlled through monopoly that is realized from a merger and acquisition. Similarly, some acquisitions have resulted in the loss of jobs and the shifting of operations to new locations thus driving opportunities away (Bruner 2005). On the other side, cross-border mergers have stimulated business activity across many nations leading to the transfer of skills, knowledge and technology. The overall welfare of the society is improved through the resulting benefits (Fuller, Netter & Stegemoller, 2002). It has been also seen that government would be in a position to yield growth from bonds. Suppliers would be in a position to benefit from a large production and competitive advantage resulting from a merger and acquisition (Andrade, et al., 2001; Ravenscraft & Long, 2000).

However, despite these findings, some financial literature expresses contrary opinions. Chambers & Honeycutt (2009) reports that mergers and acquisitions have negative impact on employee, employment and performance. Taguchi et al. (2012) adds that mergers and acquisitions contribute to job insecurity, interpersonal conflicts and declined output. As such, merger and acquisition critics maintain that these deals often have detrimental negative impacts on the shareholders (Bruner, 2005). Precisely, shareholders from the acquiring firms are the common victims of negative returns (Firth, 1980; Fuller, et al., 2002; Gaughan, 2010) compared to shareholders from the acquired firms (Taguchi, et al., 2012; Sudarsanam & Mahate, 2003). In this respect, although mergers and acquisitions have a number of positive effects on wealth creation, the majority of the views from the financial literature report significant negative wealth effects in most merger or acquisition deals.

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