Efficiency Assessment of Mergers and Acquisitions Deals Using the Example of BigTech Companies

This master's dissertation is devoted to the evaluation of the efficiency of M&A deals on the example of BigTech companies. To realize this study, the deals of four big technology companies-Alphabet, Meta, Apple, Microsoft-were analyzed. The period of the deals used in the study is from 1997 to 2022. At the first step, the main theoretical aspects of the deals were considered. Then we analyzed the methodology of evaluating the effectiveness of M&A deals. Based on the analysis of research in this area, the methodology used in this study was determined. Next step is the testing of the research model to verify the proposed hypotheses. The following conclusions were obtained as a result of the assessment of the effectiveness of M&A transactions on the example of BigTech companies using event-based analysis: - The main motivations for M&A deals are: diversification, competition, improvement of production bases and increase in customer bases; - The main results of the analyzed deals are positive: increase in company revenues, expansion of customer bases, improvement of production facilities and acquisition of qualified personnel. After using combined method, we obtained the following conclusions, while testing proposed hypotheses: - Mergers and acquisitions have a negative effect on stock returns. Companies that develop through mergers and acquisitions have worse performance in terms of stock returns for investors than companies that develop organically. The higher the capitalization, the lower the values of stock returns. This effect is due to the fact that this study uses deals on large technology companies with high capitalization level and it is difficult for such companies to get high values of stock returns due to the large size of the company. - The 2008-2009 crisis had a negative impact on the excess return of BigTech companies. - An increase in the transaction amount leads to an increase in the capitalization of BigTech sector companies, which has a positive effect on the company's wealth. Companies that develop through M&A, all other things being equal, have higher capitalization than companies that develop organically. High capitalization indicates the stability of the organization's activities, efficiency in the use of resources and the ability to generate cash flows. Also, the capitalization indicator is an indicator for investors to make a decision to invest in the company. - Companies that have a higher level of capitalization do not have a higher level of ROE, as these indicators are independent of each other. ROE is an accounting measure and has no correlation with capitalization. ROA leads to a 1.11 percentage point increase in ROE, all other things being equal. An improvement in ROA leads to a more significant improvement in ROE. There is a clear relationship between these indicators. For efficient companies, ROA growth should lead to ROE growth. The results of this study can be used to further study the effectiveness of M&A transactions using BigTech companies as an example. The conclusions formulated in this study can be used by company management to determine the most effective growth strategy for the company.