This study examines the value of horizontal acquisitions/mergers and the source from where this value is derived. Theory dictates that horizontal acquisitions can create value for a firm. This value can be evidenced through changes in the firm's financial position, its production and efficiency, or its competitive position in the marketplace. The purpose of this study is to show that firms partake in horizontal acquisitions for cost-saving reasons rather than to achieve market power. Cost saving is achievable through economies of scale and economies of scope. A sample of firms that initiated horizontal acquisitions was taken in order to determine the source of value created from an acquisition announcement. An ordinary least squares (OLS) regression analysis was used to determine which variables were successful in creating value. The value created was evidenced by an abnormal return in the firm's change of stock price from a day before the acquisition announcement date to the day after the announcement date. While the model does not prove economies of scope and economies of scale to be significant sources of value, it also does not support the theory that market power-seeking motives are significant either. In conclusion, however, both debt and growth were significant variables.


Sell, John


Business Economics




horizontal acquisitions

Publication Date


Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis



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