FINE 434 Lecture Notes - Lecture 3: Premia, Cash Flow, Event Study
Document Summary
Uncertainty created by brexit and us elections. Favorable economic setting with: low interest rates, favorable term structures of interest rates, narrow risk premia. Mergers have been found to cluster in time and industries, for example: 5 of 25 industries represented over two-thirds of merger activity. Over 2 of 3 of firms in broadcasting, petroleum producing, and air transport acquired. 50% of mergers in given industry occurred within 2-year period. Reasons: economic shocks (deregulation, oil prices), financial factors (availability of debt financing). M&a activity in other developed countries of the world has usually paralleled the us. Anti-merger laws and regulations are generally loosening internationally. Be(cid:374)efits of size a(cid:396)e usual sou(cid:396)(cid:272)e of (cid:862)s(cid:455)(cid:374)e(cid:396)gies(cid:863). Economies of scale: average costs decline with larger size, lower required investment in inventory, large firms more able to implement specialisation. Economies of scope: firms produce products due to experience with existing products. Firms must decide between internal or external production.
