Applied Mergers and Acquisitions. Robert F. Bruner

66% Mergers and tender offers. Berkovitch, Narayanan (1993) +$120 MM* 330 1963–1988 (–5,5) 75% Tender offers only. Smith, Kim (1994) +8.88%* +3.79%* 177 1980–1986 (–5,5) (–1,0) 79.1% 73.8% Tender offers only. Leeth, Borg (2000) +$86 MM 53 1919–1930 (–40,0) 56.6% In 1998 dollars. Mulherin (2000) +2.53%* 116 1962–1997 (–1,0) 66% A sample of incomplete acquisitions. Mulherin, Boone (2000) +3.56% 281 1990–1999 (–1,+1) N/A Houston et al. (2001) +0.14% (1985–1990) +3.11%* (1991–1996) +1.86%* all 27 37 64 1985–1996 (–4,1) N/A Deals in which both parties are banks. Beitel et al. (2002) +1.2%* 98 1985–2000 (–1,0) 65% Sample of European bank mergers. Fan, Goyal (2002) +1.9%* 2,162 1962–1996 (–1,+1) N/A Kuipers, Miller, Patel (2003) +2.99%* 120 1982–1991 (–1,0) N/A Foreign acquirers and U.S. targets. Gupta, Misra (undated) +7.06 MM 393 1980–1998 (–1,0) 53% Sample of acquirers and targets in the financial sector.

      Unless otherwise noted, event date is announcement date of merger/bid.

*Significant at the 0.95 confidence level or better.

EXHIBIT 3.8 Summary of Studies of Financial Statement Data

Author, Sample Period, and Sample Size	Major Findings
Meeks (1977) 1964–1972 233 mergers	ROA for acquiring firms in the United Kingdom consistently declined in postmerger years.
Salter, Weinhold (1979) Sample period unknown 16 acquirers	Average ROE for acquirers was 44% below the NYSE ROE, and the ROA was 75% below the NYSE.
Mueller (1980) 1962–1972 287 mergers	Using measures such as ROE, ROA, and ROS, U.S. firms engaging in merger activity were less profitable, although not significantly so, than comparable firms. Similar conclusions were reached for representative European countries.
Mueller (1985) 1950–1992 100 firms involved in mergers	The largest 100 firms in the United States involved in merger, both conglomerate and horizontal, suffer significant losses in market share.
Ravenscraft, Scherer (1987 article) 1950–1977 471 mergers	Significant negative relationships between operating ROA and tender offer activity. Other things being equal, firms with tender offer activity were 3.1% less profitable than firms without the activity.
Ravenscraft, Scherer (1987 book) 1950–1977 471 mergers	ROA declined on average 0.5% per year for target companies that were merged under pooling accounting.
Herman, Lowenstein (1988) 1975–1983 56 hostile takeovers	ROC for acquirers (using tender offers) increased from 14.7% to 19.6% postmerger in 1975–1978. A similar measure for the 1981–1983 period showed a decrease in ROC.
Seth (1990) 1962–1979 102 tender offers	Using a modeled (rather than a market) value of equity based on expected cash flows and a required rate of return, acquisitions returned 9.3% in additional equity value. Operational synergies, in the form of additional cash flows, returned 12.9%, and financial synergies, from changes in the required rate of return, were –3.6%.
Healy, Palepu, Ruback (1992) 1979–1984 50 mergers	In 50 largest U.S. mergers, merged firms showed significant abnormal improvements in asset productivity (asset turnover), but no significant abnormal increases in operating cash flow margins.
Chatterjee, Meeks (1996) 1977–1990 144 mergers	Before 1985, U.K. mergers showed no significant increase in profitability after merger. Between 1985 and 1990, firms showed significant improvement in accounting profitability returns (13–22%) in years following merger, presumably because of changes in accounting policy.
Dickerson, Gibson, Tsakalotos (1997) 1948–1977 613 mergers	For the first five years, postacquisition, ROA for acquirers is 2% lower than ROA for nonacquirers.
Healy, Palepu, Ruback (1997) 1979–1984 50 mergers	Based on the 50 largest U.S. mergers, operating cash flow