Document Type

Honors Capstone Project

Date of Submission

Spring 5-1-2005

Capstone Advisor

Ravi Shukla

Honors Reader

Yildiray Yildirim

Capstone Major

Finance

Capstone College

Management

Audio/Visual Component

no

Capstone Prize Winner

no

Won Capstone Funding

no

Honors Categories

Social Sciences

Subject Categories

Economics | Finance

Abstract

Creating successful vertical mergers is a challenge for organizations across Corporate America. This honors thesis contains a study of five of those vertical mergers. To complete this study, five mini cases were created that outlined those deals. In addition, statistical analysis of the post merger abnormal returns was completed for each of these deals. Abnormal returns are calculated as the difference between the returns occurring in the post-merger period and the normal returns, i.e., the returns that would have been expected if the merger had not taken place.

This thesis targets the mergers of Viacom Corporation and CBS, Merck Corporation and Medco Corporation, Walt Disney Co. and ABC, Sony Corporation’s acquisition of Columbia-Tristar, and the merger of America Online and TimeWarner.

This thesis shows that four out of five cases experienced negative abnormal returns between the date of the merger and May 2005. In the fifth case, where the abnormal return is positive, the value added is not statistically significant. The cases discuss these deals, taking care to document the discrepancies between what the architects of these mergers predicted on deal day and what actually resulted.

In the end, this thesis will confirm that the abnormal return was negative in four out of the five cases and that there were five distinct consistencies in incorrect management expectations.

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

Included in

Finance Commons

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.