The Wealth Effects of Mergers and Acquisitions in the United States of America for the Target Companies

Mergers and acquisitions (M&A) lie at the heart of the strategies employed by many companies and are often used as tools to overcome difficulties in the market. 2007 is a year that marks a place in economics globally and U.S. has its role there. Consequently, this paper investigates the wealth effects of M&A announcements for target firms in the U.S. in 2007. During that time period, the cumulative abnormal returns generated were around 13-14% for the targets after the M&A announcements. To a large extent, these returns were affected by firm specific factors like total assets, book value per share, gross profit, operating expenses and market value which were found to have empirically significant influence.