SYNERGY, AGENCY COST, AND THE DETERMINANTS OF PREMIA PAID IN MERGERS AND ACQUISITIONS ACROSS PAKISTAN

Merger and acquisitions are considered as one of the important and useful strategy for business growth and expansion. Present research examines to explore the determinants of mergers and acquisitions on premia paid in financial and non-financial sectors of Pakistan for the period of 2001 to 2017. The panel data methodology used to evaluate the determinants of premia paid merger and acquisition. Hypotheses of the study about the creation of value by mergers are tested on premia paid in a sample of 84 recent mergers and acquisitions. The outcome of present research reveals that premia increase with financial although not with real synergies and with the scope for “managerial" behavior in the target firms. The finding is shown acquirers' willingness to pay also increases with their scope for managerial behavior and we ascertain that market gains (losses) to acquirers' shareholders do not disfigure the associations between acquisition premia and sources of value. The results of determinants reveal the reduction of agency conflicts in bidder firms and show that main reason behind M&A premium is to achieve a big size and prestige rather than value maximization. The premia paid determinants is significant result shown for Target and Acquirer Company. The findings of this study help investors in devising their investment strategies based on the timing of important announcements by companies such as M&A.