STUDY OF MERGERS AND ACQUISITIONS IN THE REAL ESTATE INDUSTRY, A

Abstract

Mergers and acquisitions (M & A) have increasingly become an enduring feature of the business world. Through M & A, companies are able to achieve growth and resource reallocation at a speed not achievable through internal development. Such techniques also allow companies to diversify into new markets, gain access to technologies, and add to the capabilities that the companies find hard to develop internally. M & A enable companies to increase market shares, achieve economies of scale, create barriers to deter competitors, and to meet other pervasive trends that impact their prospects for survival. Hence, this explains for the substantial increase in the level of M & A activity, both locally and abroad. This dissertation was undertaken to explore these techniques that are gaining prominence in Singapore. Theoretical and empirical aspects are analyzed to have a better understanding of M & A. The theoretical aspect includes exploring the M & A trends in U.S., Asia Pacific region and Singapore and looking into other important issues to provide an overview of the entire M & A mosaic as a part of basic managerial decision. M & A in real estate industry is found to be increasing in the three regions explored and growth, synergy, market power and diversification are four of the main motives to go into merger. In the empirical aspect, study was carried out to examine the impact of M & A on the operating performances of the acquirers and the target companies by using financial ratios and to examine the impact of M & A on the wealth of the shareholders at different event periods by using stock returns. Three local case studies are explored. The results of this study show that merger leads to reduced profitability and no distinct improvement in efficiency, liquidity and financial leverage of the firms; returns to the acquirers are approximately zero in the short term and negative in the long term and marginal shareholders' wealth are earned by the target firms in the short term only.