Returns of Merger and Acquisition Activities in the Gaming Industry

The gaming industry experienced numerous merger and acquisition (M&A) activities in the 1990s. This study examines the cumulative abnormal returns (CARs) for gaming target and bidding firms around the announcement of mergers and acquisitions (M&As) from 1985 to 2004. The results showed that both targets and bidders had significant positive returns. The study finds that gaming targets enjoy significant positive returns consistent with the literature. Gaming industry bidders earn significant, positive returns. The literature on bidder returns shows mixed results; some were positive, some were negative but many are not significantly different from zero. The positive bidder returns in the gaming industry found here are possibly caused by the high entry barriers to the gaming industry such as acquiring gaming licenses, familiarity of gaming regulations, and experience. It is generally much more difficult for a non-gaming bidder than a gaming bidder to acquire gaming industry targets. As a result, there is usually much less competition in gaming industry M&As than for other industries. This is likely a major cause of the higher returns for gaming bidders than found for bidders in most other industries.