The purpose of this paper was to examine why so many M&A (Mergers and Acquisitions) continue to take place at steep premiums in spite of lower returns to shareholders. The pharmaceutical and biotechnology industries present a unique opportunity to investigate the financial impact on acquiring companies and of acquisition premiums. This paper empirically examines if post-merger financial performance is correlated to acquisition premiums. The paper analyzes M&A in the pharmaceutical and biotechnology industries with effective dates between January 1, 1998, and December 31, 2005 The analysis showed that acquisition premiums are positively related to long term under performance of the acquiring company compared to the period prior to the acquisition. The main contribution of this paper is the development of a framework and criteria for assessing the impact of acquisition premiums on post-merger financial performance.
Tarasovich, Barbara. "The Impact Of Mergers And Acquisition Premiums On Financial Performance." Journal Of Theoretical Accounting Research 10.1 (2014): 1-39.