Mergers & Acquisitions

Bachelor Thesis from the year 2011 in the subject Business economics - Investment and Finance, grade: B/1,7, - (Linnaeus University - School of Business and Economics), language: English, abstract: Today, companies need to constantly expand their business to stay ahead of the severecompetition. As competition grows more intense, it makes sense to join forces or simplyacquire the rival to provide the most diverse service and to reach even the last customer.But is it really only about the need for efficiency to merge and acquire competitors? Aremanagers and investors right about their hope, that every new acquisition or merger offersmore control over the market? Or are they themselves pushed into these promising expectations?This research focuses on how social behavior influences value creation in mergers andacquisitions. Throughout history, waves have been observed that reflect the excessive hypefor perennial need of growth. Growth by acquisitions and mergers is seen as key element tocreate value by investors and managers. However, reality looks different. This researchfocuses on a two step approach by first describing underlying social catalysts that amplifythe trend towards value creation in mergers and acquisitions. Secondly, to verify the investigationof social behavior, the results are matched to a financial approach to detect whetherthe transaction price justifies the current value and possible synergies or whether valueis destroyed.A case study was conducted of Boss Media AB, a software company situated in the onlinegaming industry, which experienced several mergers and acquisitions since their foundationsand was eventually acquired itself. The company provided an interview and furtherinformation on their involvement with mergers and acquisitions.The research showed that mergers and acquisitions continue to increase in number andvalue, leading to the amplitude of each wave being higher than the previous one. This alsomeans that more value is destroyed. It is illustrated that managers being determined to havebet on the right horse, are often more influenced by social behavior and trends than theythink they are. Blinded by the overestimation of their own abilities, and prosperous shorttermprofits, managers overvalue their investment choices. Hence, the research implies thatmanagers destroy shareholder value even though they initially intended to create it.