Development of new approaches to forecasting and evaluating the effectiveness of mergers and acquisitions

The article touches upon the problem of inconsistencies and insufficient accuracy of quantitative methods applied in analyzing mergers and acquisitions. The authors point out that the criteria for the effectiveness of the concluded deals used by the majority of researchers do not conform to the real factors which are not taken into consideration by companies’ top managers when making decisions about a deal. This results in the gap between theoretical developments and their practical application and also limits the implementation of scientific results in practice. The authors study and identify the main disadvantages of the most common analysis methods: Cumulative Abnormal Returns, or CARs, Buy and Hold Abnormal Returns, or BHAR, and also, they suggest hypotheses of medium-term profitability and long-term payback illustrating the criteria of predicting the success of mergers and acquisitions from the viewpoint of management. The authors have developed new approaches to statistical analysis of the market of mergers and acquisitions that allow to identify the deals the results of which differ significantly from the average in one direction or another. Further development and empirical testing of the suggested approaches can provide for the introduction of new techniques of evaluation of effectiveness of mergers and acquisitions, as well as for creation of sectoral and universal recommendations for top managers of the buyer companies on their basis.

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