M&A Effects on Target and Acquirer Returns Post Acquisition Announcement

In 2001, AOL acquired Time Warner in a massive $165 billion transaction. This deal was made to combine legacy media with brand new technology, but ultimately ended in failure, with major culture clashes, the dot-com bubble, and an inability to meet their promises to the public. These deals can help expand market share and drive valuation, but they are not without risks. The goal of my project is to identify how mergers and acquisitions announcements affect the stock prices of both acquirer and target companies. This study utilizes resources such as publicly available information on securities, 10-K/10-Q reports, and news articles to track the share price behavior of 25 different M&A transactions announced between 2015 and 2025 in which both the target and acquirer remained public for at least one year after the announcement. Acquirer and Target returns are analyzed on a daily basis, specifically highlighting the days immediately, 6 months, and 1 year after the deals were announced. The results indicate that while both acquirer and target returns were most volatile directly after the announcement, the acquirers proved to be more volatile, and that over the long term, the acquirers had greater cumulative returns. In short, the findings suggest that M&A announcements create short term uncertainty, but over time, acquirers tend to have a stronger performance. The findings from the project offer insight into whether short-term stock movements correspond with long-term value creation, which is valuable insight for investors, corporate managers, and policymakers.