Do Industry and Size Matter? Impact of Media M&A Announcements on Acquirer Shareholder Returns in the United States (1996-2020)

Abstract

Since the passage of the 1996 Telecommunications Act, which broke down barriers between emerging and traditional media industries, media companies in the United States have engaged in unprecedented levels of mergers and acquisitions. From 2000 to 2018, media companies - which include the Printing & Publishing, Communications, and Movie Production industries - accounted for over 10% of total domestic M&A deals and over 15% of total domestic deal value. This paper takes an event study approach to analyzing the short-term impact of media M&A announcements on the shareholder value of acquiring media companies since the landmark cross-industry deregulation of March 1996. After analyzing 2,235 unique acquisitions, I observe that both the size of the transaction, and industry of the target and acquirer have a significant impact on cumulative abnormal returns surrounding an M&A announcement. The results suggest that both larger media deals, and those that involve a target and acquirer in the same media sub-sector, are associated with more positive short-term market reactions to the announcement of the deal. Specifically, transactions ranging from $25 million to $1 billion in value seemed to perform best, while those less than $5 million realized the lowest returns.