Merger and Acquisitions among Brazilian Firms

This work investigates M&A transactions among Brazilian firms from 2002 to 2006. 101 announcements have been sampled totalizing R$ 223,7 billion. Two techniques were used: the event studies on returns before and after M&A announcements and the event studies on accounting based measures. The empiric evidence and the statistic tests led to the conclusion that the announcement of M&A transactions raised expectations of value maximization to the shareholders of the firms combined. Nonetheless, for the target firm shareholders, in the occurrence of a tender offer, with institutional investors such as pension funds taking part in the minority group, the announcement of M&A transactions was priced differently between common and preferential stocks, causing a reaction alike to the myopia hypothesis in the market, a particular phenomenon in Brazil. It must be pointed out that Accounting numbers did not corroborate with the average expectations of the market related to synergies associated with the combination of firms sampled. The econometric results suggest the need of adopting impairment tests to check the economic substance of goodwill.