AMERICAN UNIVERSITY OF MADABA

Dr. Mustafa al Qudah

Mergers and
Acquisitions
Mohammad Mamoun Al Far
120476
2016/2017

A research done to understand the effects of cultural differences between companies

on Mergers and Acquisitions. And to understand the effects that Mergers and
Acquisitions might have on stock prices of the companies involved
Mohammad-Al-Far

Dedication

This paper is dedicated to everyone who ever had a role in

getting me to where I am today, whether in good faith or bad

faith. Thank you.

This paper is especially dedicated to my dear and beloved

family and friends.

This paper is dedicated to all those who passed away and left

us way too early, May your souls rest in peace.

This paper is dedicated to the whole faculty of the American

University of Madaba, especially to the business

administration faculty.

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Mohammad-Al-Far

Acknowledgment
My success has required a lot of hard work on my side and even harder
work by those who supported, tolerated me and had enough patience to
stick with me till the end. Those are whom Im extremely fortunate to have
around.

My deepest and warmest gratitude goes out straight to the faculty of the
American university of Madaba, fort their professional guidance and
supervision, In addition to teaching me the skills that will accompany me
throughout my journey after this amazing part of my life which I will
always be proud of.

Not to forget each and every person at the Accounting department,

department staff and fellow colleagues, i appreciate your endless support,
friendship and encouragement.

As my college years are coming to an end I would like to take this

opportunity to thank my family who were and always will be the fuel to my
success and the reason I am the person i am today, by always believing in
me and mentoring me to be the best that I could be.

Last but not least, a special thanks to my partner in life and one of the
main reasons behind my success, to the person who has always pushed me
to my limits and helped get the best out of me, thank you Haya Mashhour
Al Far.

Everything i acquired learned experienced and witnessed along the past

years at The American University of Madaba, will be engraved in my heart
and mind. In addition, it will be a stone to help me start my success story.

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Table of contents

Abstract 4

Introduction 5

Reseach problem 6

Aims and objectives 6

Literature review 7

Research methodology/research hypothesis 10

Research problems study 11

questionnaire 16

Results 21

Tests 22
T-Tests 29
Conclusion 31

References 32

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Abstract

Mergers and acquisitions are 2 of the most interesting subject in business for
me. I first got interested in this topic during studying for my CMA
certificate. These topics are interesting because of how technical they can be,
and how much detail can go into them.

Mergers and acquisitions are directly and indirectly related and that is why I
could not choose one to talk about, you cannot do a research on one of these
topics without going into the other one.

In this research I am going to talk about each one of them in detail, the
technicalities of them, the regulations related to them in Jordan specifically
and in other parts of the world generally, the problems that faces companies
and individuals when implementing them, the effect of cultural differences
between management and companies on the success of M&A, the
techniques that companies could use to protect themselves against them and
the techniques companies use to enforce them and lastly their impact on not
only the corporation itself and its financial statements but on all stakeholders
beginning with shareholders to customers and suppliers.

The data collected and analyzed in this research regarding mergers and
acquisitions in Jordan will be collected by professionals who are specialized
in data collection for business studies and analyzed using the Statistical
Package for the Social Sciences (SPSS) software and myself to present you
with the findings.

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Introduction
A merger is a voluntary deal done between two companies to unite and form a new
third company. In most mergers none of the original companies survive, the two original
companies are dissolved and a new company that is the combination of them is formed.
For example company A and company B would merge to form company C, Company A
and B would cease to exist.

There are five different types of mergers

Conglomerate: Two companies in different industries unite.

Horizontal: Both companies are in the same industry.

Market Extension: Two competitors unite from the same industry.

Product Extension: The two united companies sell products that consolidate each
other.

Vertical Merger: One of the companies unites with a supplier.

Acquisitions are an action in which a company gains control over another company by
buying more than 50% of its stocks without the approval of the shareholders or the
management. Acquisitions are often paid for in cash, stocks in the acquiring company or
both. Since acquisitions are often hostile there are many ways for the target company to
defend itself against the acquisitions and ways for the acquiring company to force its
control over the target company.

There are many reasons why a company might want to acquire another company.

1) Economies of scale (reduced costs by increasing production).

2) Greater market share.
3) New product extensions.
4) Easiest way to enter a foreign market since the target company will have
already set a customer base.

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Research problems
The topics of mergers and acquisitions are very wide and very important in the field
of accounting, and with these procedures there must come problems and limitations,
and I cannot talk about all of these limitations in this paper, I am only going to
mention a couple of problems.

1) How can companies overcome the cultural and language differences in

mergers and acquisitions of foreign companies since most managers do
not take that into consideration when entering a merger or an
acquisition?

2) What effect does M&A have on stock prices of both companies?

Aims and objectives

The main aim of this study is to understand the process of mergers and acquisitions, and
to understand their effect not only on the companies involved but on all stakeholders in
general as well as the market as a whole.

The interesting thing about this research is the fact that mergers and acquisitions are not
prevalent in the Jordanian market because it is a relatively small market that does not
have many large corporations; mergers and acquisitions are mostly done by large
corporations with enough capital to undergo the process;. Also to understand the
processes and different types of bankruptcies in Jordan in addition to the differences
between the 3 mentioned chapters, who is eligible to file under each chapter and what are
the ramifications on both the debtors and creditors under each.

To understand the basic concepts of M&As.

To understand the differences between them.
To examine the reasons a company would engage in either one.
To examine the methods available to companies that wish to
avoid an acquisition or force one.
To understand how cultural differences might affect a merger
or an acquisition.
To understand the effect of M&A on stock prices of both the
acquiring and acquired companies.
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Literature review
Mergers have proven to be a significant and increasingly popular means for
achieving corporate diversity and growth. The effectiveness of this strategy
depends upon extensive planning and careful implementation (Blake & Mouton,
1984; Jemison & Sitkin, 1986; Salter & Weinhold, 1979).
Most of the definitions of culture focus on the beliefs that members of an
organization share. Although the term often is used as if organizations have a
monolithic culture, most firms have more than one set of beliefs influencing the
behaviour of employees (Sathe, 1985).
These various subcultures within one organization may be divided along
occupational, functional, product or geographical lines; such subcultures may be
enhancing, orthogonal, or counter to one another (Sathe, 1985).
One of the shortcomings of much of the previous research about merger
effectiveiness has been to focus on the acquirer and its objectives and strategies
at the expense of the role of the acquired company. The typical approach to
merger implementation has been to expect the acquired firm either to adjust or to
adapt to the acquirer. However, the active resistance that often accompanies
mergers is evidence that the desires and preferences of the members of the
acquired firm cannot be ignored (Walter, 1985).
Firms can internationalize in a number of ways, including through exports,
licensing, and foreign direct investments (e.g... Dunning, 1980, 1988).
Foreign direct investments (FDIs) have increased dramatically over the last few
decades, both in relative and absolute terms, reaching annual growth rates of
nearly 30 percentage and a worldwide total of about $1.5 trillion in the late
1980s (United Nations, 1991,1993).
Experience is a prime source of learning in organizations (Penrose, 1959).
Learning is fostered by diversity in experience. Operating in diverse
circumstances increases the variety of events and ideas to which a firm is exposed
(Huber, 1991).
Leading to a more extensive knowledge base and stronger technological
capabilities (cf. Hedberg, Academy of Management Journal February 1981;
March, 1991).
Learning different ways of doing things fosters innovation (Mezias & Glyn,
1993).
Managers and workers with experience in a variety of environments are more
productive than workers without such experience (Walsh, 1995).
CEOs of internationally diversified firms have richer knowledge structures than
CEOs of domestic firms (Calori, Johnson, & Sarnin, 1994).
The greater diversity in the knowledge of managers and other workers
aggregates to richer knowledge structures at the level of the firm {Walsh, 1995)
Firms that remain within one industry in one particular country, with familiar
opportunities and threats and familiar routines with which to handle them (cf.
Huff, 1982; Reger & Huff, 1993).
May perform well in the short run (Miller, 1993, 1994).

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And acquirer. A handful of studies examine the impact of mergers on bondholder

returns (see Kim and McConnell (1977), Asquith and Kim (1982), Eger (1983),
Dennis and McConnell (1986), and Maquieira, Megginson, and Nail (1998)). The
evidence for acquirer bonds is mixed. Eger and Maquieira, Megginson, and Nail
find that the excess returns to acquirer bonds at the announcement of a merger
are significantly positive; Dennis and McConnell find that they are (marginally)
significantly negative; and Kim and McConnell and Asquith and Kim find that
they are insignificant. However, for target bonds the evidence is unanimous; all
studies find insignificant excess returns to target bonds. This result is puzzling,
since targets are generally much smaller than acquirers, we would expect the
target firms bonds to experience greater changes in value, on average, than the
acquiring firms bonds. The evidence on the wealth effects of target and acquirer
equity is consistent with this intuition. Target equity wealth effects are much more
pronounced than acquirer equity wealth effects (Kim and McConnell 1977).
We examine the impact of takeover announcements on bondholder wealth in a
sample of 940 mergers and acquisitions during the period 1979 to 1997.
Excluding bonds with matrix prices during the announcement period, our final
sample includes 818 bonds of 265 target firms and 3,083 bonds of 831 acquiring
firms. In sharp contrast with previous studies, we find strong evidence of a
coinsurance effect for target bonds. Target bondholders earn a significantly
positive mean excess return of 1.09 percentages during the announcement period.
Furthermore, we find that target bond wealth effects are highly dependent on the
risk of the bond. In particular, while investment grade target bonds experience a
mean excess return of 0.80 percentages, below investment grade target bonds
experience a mean excess return of 4.30 percentages. Both the mean excess
returns and their difference are highly statistically significant. By contrast, the
mean excess bond return for acquirers is only 0.17 percentage (statistically
Significant at the one percentage level), and there is no significant difference
between the excess returns of acquirer bonds rated investment grade and below
investment grade. We partition the sample into a number of additional groupings
to investigate the determinants of bond returns. The results for target bonds
generally support the risk, leverage, and maturity predictions of Shastri (1990).
Shastri predicts that target bonds will benefit when the target is riskier than the
acquiring firm. Consistent with this prediction, we find that target bonds with
credit ratings below the acquirers earn positive excess returns that are
significantly larger than the negative excess returns earned by target bonds with
credit ratings above or equal to the acquirers. We find similar results using the
variance of unlevered stock returns to measure pre- versus postmerger asset risk.
Shastri also predicts that target bondholders will benefit when the merger
decreases leverage (i.e., when the target firms leverage ratio exceeds the
acquiring firms leverage ratio), and when target bonds have a shorter maturity
than acquirer bonds. Consistent with the leverage prediction, we find that the
mean excess return is significantly positive for the group of target bonds where
the merged firms leverage ratio is less than the targets pre-merger leverage
ratio. And consistent with the maturity prediction, we find that target bonds with
shorter maturity than acquiring firm bonds have significantly larger excess
returns than target bonds with longer maturity than acquiring firm bonds.
Finally, we find that target excess bond returns are significantly larger when the

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target is relatively small, when the offer is not characterized as hostile, and when
the offer occurs in the 1990s. As discussed below, the significantly larger target
bond returns in the 1990s coincide with an increase in the incidence of event risk
covenants for target bonds (and especially below investment grade target bonds)
in the sample during this time period. (Holmstrom and Kaplan (2001) for a
comparison of U.S. merger activity in the 1980s and 1990s).
We live in a world of limited liability. Everyone's assets are limited. Each of us
possesses only a finite amount of real and personal property. Moreover, the most
valuable asset for nearly all of us-the present value of what we shall earn during
the remainder of our working lives-is finite as well. We all must reckon with the
possibility that we might incur obligations that we are incapable of meeting. A
fundamental question we would need to address, even if there were no bankruptcy
law at all, is whether this fact of limited liability should affect the rules of debt
collection. We need to ask, in other words, whether the right of creditors to bring
suit, reduce their claims to judgment, and have the sheriff levy on or garnish our
assets should be limited by anything other than whether we have assets.( Jackson,
The Fresh-Start Policy in Bankruptcy Law, 98 HARV. L. REV. 1393 (1985)).
One could argue that such limits should not exist. Limitations on the ability of
creditors to obtain repayment ultimately make it more difficult for debtors to
obtain credit in the first instance. Moreover, debtors who are concerned about
falling too deeply into debt can organize their affairs to minimize the chances of it
happening. For example, a debtor may be able to take out insurance to protect
himself against tort suits. A debtor may also be able to buy insurance to protect
him if he becomes disabled and is unable to continue work. Finally, one can
argue that to the extent that we are worried that the creditors' efforts to obtain
repayment will leave the debtor destitute, the problem is no different from one we
encounter when someone is left destitute through some other misfortune.
(Jackson, the Fresh-Start Policy in Bankruptcy Law, 98 HARV. L. REV. 1393
(1985)).
As Professor Thomas Jackson and I have shown elsewhere, Kovacs's obligation to
the state of Ohio must be a "claim" within the meaning of the Bankruptcy Code.20
If Ohio did not have a claim against Kovacs, it would have no right to reach his
existing assets, as the Bankruptcy Code provides for distribution of property of
the estate only to holders of claims. 2' this result is absurd in the common case in
which the disposer of toxic wastes is a liquidating corporation that will dissolve
under state law shortly after the bankruptcy proceeding is over. In these cases,
Ohio, if it had won in Kovacs, would receive nothing during the bankruptcy
because it had no claim. Moreover, Ohio would receive nothing once the
bankruptcy proceeding was over, because the person that owed the obligation
(the corporation) would have distributed all of its assets to its creditors. (Baird &
Jackson, Kovacs and Toxic Wastes in Bankruptcy, 36 STAN. L. REV. 1199
(1984)).

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Research methodology
The main objective of this study is to examine the objectives and effects of mergers and
acquisitions. To achieve this, a descriptive analysis is required rather than formulating
hypotheses for testing. Another objective is to investigate the factors influencing a
companys decision. To achieve this objective, it is necessary to formulate and test a
number of hypotheses.

Research hypothesis

Most M&As are started by large multinational companies, and this often causes cultural
differences between these companies.

In most acquisitions and mergers the acquiring company appoints some of their existing
managers to manage the company being acquired, this causes many difficulties to the
managers who are forced to work in a completely new environment and culture which is
often the main reason behind the failure of failing acquisitions and mergers.

This theory leads to the following hypothesis:

Hypothesis 1 (H1): there is no direct relationship between the cultural environment of

the merged or acquisitioned companies and the success of the merger/acquisition.

The stock market reacts very quickly and rapidly to news, whether it is good or bad news.
And M&As are news that would almost definitely affect the company in many ways, and
thus affect the stakeholders of the company, that is why share prices often react very
quickly to such news.

This theory leads to the following hypothesis:

Hypothesis 2 (H2): there is no direct relationship between mergers or acquisitions and

the stock price of either of the companies.

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Research problems study

What are Mergers and acquisitions and how do they differ?
A merger is a voluntary deal done between two companies to unite and form a new
third company. In most mergers none of the original companies survive, the two original
companies are dissolved and a new company that is the combination of them is formed.
For example company A and company B would merge to form company C, Company A
and B would cease to exist.

Acquisitions are an action in which a company gains control over another company by
buying more than 50% of its stocks without needing the approval of the shareholders or
the management. Acquisitions are often paid for in cash, stocks in the acquiring company
or both. Since acquisitions are often hostile there are many ways for the target company
to defend itself against the acquisitions and ways for the acquiring company to force its
control over the target company.

In the simplest form, merger is combining two companies while acquisition is one
company acquiring or gaining control of another company.

The table below will provide a broader explanation of the main differences between
them;

MERGER ACQUISITION
Meaning A deal between two companies A company gains control over
to unite and form a new third another company by buying
company. more than 50% of its stocks
without needing the approval
of the shareholders or the
management.
Formation of a new company Yes No
Decision Friendly and mutual decision Could be mutual or hostile
depending on the acquisition
and management of the
acquired company

Minimum number of
companies involved
Purpose
Size of companies
Legal steps
3 2
Decrease competition and Fast growth
increase efficiency
Usually both companies are Size if the acquiring company
almost the same size is usually larger than the
acquired company
More than acquisitions Less than merger

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How do companies protect their selves against acquisitions?

Acquisitions are when one company gains control of another company by buying all of
its assets or a controlling interest of its stocks. Acquisitions can be friendly and mutual
which means that an agreement between the two companies is reached and the transition
is easy.

But that is not always the case as sometimes acquisitions can be more hostile and
complicated if both parties are not able to reach an agreement, in which case the
acquiring company might publish a tender offer which is an invitation for all of the
acquired firms shareholders to sell their stocks to the acquiring company for a higher
price than is offered in the market.

In case of hostile takeovers the acquired company can approach the situation in different
ways to try and block the takeover, these are called Anti-takeover defenses.

Some anti-takeover defenses include;

Green mail: the acquired company may offer the acquirer a deal in which they
buy their stocks back at a substantially higher price than the acquirer paid for the
in the market. Or offer them a large sum of money to stop the acquiring process.
Staggered election of directors: is a way that companies use to protect against
hostile takeovers by not giving their shareholder the immediate right to vote for
the board of directors, they would have to own the shares for a number of years
before being able to vote, which means that even if the opposed company buys all
of their shares they would not benefit as they would not be able to place a new
board of directors and gain full control over the company unless they wait many
years.
Golden parachute: this is a clause that is inserted in the executives contracts
which states that in case of hostile takeovers the acquiring firm would have to pay
these executives large amounts of money if they were to terminate their contracts,
which would make the company less attractive to acquirers because of the large
amounts they would have to pay in order to place their executives after the
takeover.
Fair price provision: are warrants issued to shareholders who give them the right
to purchase stocks at half the market price in case of a hostile takeover attempt,
which would greatly reduce the share prices and reduce the value of the company
to a degree which would make any company lose interest in acquiring them.
Poison pills: are any provisions, laws, or contracts that the management installs
within the company to reduce its value in case of any hostile takeover.
Leveraged buyout & going private: the management of the target company buys
a company (subsidiary) to the mother company using very little equity and a lot of

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debt in which they offer the assets of the company as collateral to the debts to
reduce the market value of the company and make acquirers lose interest in it.
Flip-over rights: gives the shareholders double the interest from stocks if they do
not sell to the acquirer in case of takeovers.
Issuing stocks to increase the number of shares outstanding.
Reverse tender: offering a higher price for the shares than the acquirer is offering
in his tender offer.
Employee stock ownership plans: giving employees more stocks (more
ownership) in the company because they would usually be more favourable to the
current management and would not sell their stock to the opposition.
White night: management arranges an alternative tender offer with a different
investor that would be more favourable to the management and to shareholders.
Crown jewel transfer: management would sell or dispose of the assets that made
it a desirable target to the acquirer to make him lose interest in their company.

How can companies overcome the cultural and language

differences in mergers and acquisitions of foreign companies?
In 2015 alone $4.7 trillion worth of global M&A deals were signed, many of which has
already failed and many will fail, the main reasons for M&A failures are the lack of well-
executed cultural integration plan, incorrect valuations, lac of effective due diligence plan
and the general economic environment.

The leading reason according to a study done by KPMG was the lack of well-executed
cultural integration plan at (40%) followed by incorrect valuations at (18%), so we can
conclude that most M&As are failing because of the cultural differences between
companies especially those in different countries and markets. To avoid this problem
companies are starting to set steps for the process of cultural integration between
companies so that they would have clear sense of unity, direction, vision, mission and
culture.

This process is done to increase communications between both parties so that they would
understand the culture and environment that each works in, which has a great impact on
decision making and on the chances of success of the M&A.

Inward strategic consulting has come up with a 7-step process to cultural integration
based on studying and analyzing recent mergers and acquisition, this 7-step process is as
follows;

1. Leadership structure: The structure of the new organization must be clearly

defined and presented in a clear way. This step should identify a clear integration
timeline, and demonstrate unity and agreement on all key topics and issues.

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2. Cultural differences, diagnosis and prescriptions: Conduct research to

determine differences within each corporation in regard to cultural strengths and
weaknesses of their respective companies. Use techniques to enable common
ground in regard to cultural integration. Attempt to build consensus to help
overcome disparity and arrive at agreements.
3. Establish a communications council: Bring together key functional leaders to
navigate the communication requirements, frequency, and talking points that need
to be conveyed to the organization. These talking points should be transparent
and. This council should integrate experienced and professional communication
management professionals who can explain why it is important for the company
and individuals and what new attitude/behaviors are necessary for successful
merger to take place.
4. Define the new culture: Attempt to detect the key cultural elements desired in
the new merged company. Try not to hold onto old values of each company, but
rather unify all values around something new, fresh, and exciting for the future.
5. Vision, mission and values: Elaborate on the new culture by defining the
mission, long-term vision, and collective values of the new company
6. Cultural communications plan: senior leadership must take responsibility for
the communications plan. Communication is not a task that should be assigned to
lower-level employees. There should be a systemic, sequential, tactical
communications plan to make the merger successful. Communicate regularly and
frequently.
7. Measurement and benchmarking: To demonstrate success and report on
progress, it is important to conduct benchmark research to assess the
understanding and progress over time.

What effects do mergers and acquisitions have on the stock prices

of the companies involved?

Acquisition

When a company acquires another company, there usually is a short-term effect on the
stock price of both companies. The acquiring company's stock will fall while the target
company's stock will rise.

The reason the target company's stock usually goes up is that the acquiring company
typically has to pay extra for the acquisition: the acquiring company offers more per
share than the current price of the target company's stock to give incentive to the current
owners of the target company to sell their shares.

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The acquiring company's stock usually goes down for a number of reasons. First, as
mentioned above, the acquiring company must pay more than the target company
currently is worth to make the deal go through. And there are often a number of risks
involved with acquisitions. Here are some of the risks the takeover company could face
during an acquisition:

A weak integration process: problems arising from lack of, or weak, integrating
different workplace cultures.
Lost productivity because of management power struggles.
Additional debt or expenses that must be incurred to make the purchase.

It should be noted that what is discussed here only lasts on the short-term and not on the
long-term value of the acquiring company's stock. If an acquisition goes smoothly, it will
be good for the acquiring company in the long run.

Merger

A merger affects the shareholders of both companies in different ways and by many
factors, including the economic environment, size of the companies and management of
the merger process. The conditions of the merger may have different effects on the stock
prices of each participant in the merger.

The merger of two companies causes significant volatility in the stock price of the
acquiring firm and that of the target firm. Unlike acquisitions where Shareholders of the
acquiring firm usually experience a temporary drop in share value, while shareholders of
the target firm see a rise in share value. The stock price of the newly merged company is
expected to be higher than that of both firms, and it is usually profitable for the firm's
shareholders, who benefit from the stock price increase. If no problems arise in a merger
the shareholders of the merged companies usually experience improved long-term
performance and dividends.

The shareholders of both companies may experience a dilution of voting power because
of the increased number of shares released during the merger process. This phenomenon
is noticeable in stock-for-stock mergers, where the new company offers its shares in
exchange for the shares of the original companies at an agreed conversion rate.
Shareholders of the larger company experience minimal loss of voting power, while

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shareholders of the smaller company may see a significant loss of their voting power in
the relatively larger puddle of stakeholders.

Questionnaire

This questionnaire is a part of a study prepared by the researcher for educational purposes
only, the survey responses will be used by the researcher to write a report of an
investigation in partial fulfillment of the requirements of The Bachelor of Arts in
Accounting. Your identity and the identity of your company will remain confidential.
Only aggregated data will be presented in the final report, and no individual responses
will be revealed or communicated to any third party that is not involved in this study.

Mergers and acquisitions

As a participant in this study, the researchers would like to know your opinion about
Mergers and acquisitions and its effect on the financial statements and the overall
performance on the business environment of the Hashemite Kingdom of Jordan.

For this purpose, the researchers made this questionnaire to detect The Impact of Mergers
and acquisitions on the profit and performance of the company.

Please be advised that this is an important study as, although it has been examined
elsewhere, no analysis of this kind has been made in Jordan

This questionnaire should take no more than 20 minutes in most cases (and considerably
less in some). If you take part in the study, you have the right to:

Refuse to answer any particular question, and to withdraw from the study at any
time.
Ask any further questions about the study that occurs to you during your
participation.
Be given access to a summary of the findings from the study when it is concluded.

Thank you for participating in this research. Let me know if you have any questions.

Yours sincerely,
Mohammad el Far
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PART ONE: PERSONAL INFORMATION

Academic major:
A. Accounting
B. Finance and banking
C. Business administration
D. Others ( )

Academic degree:
A. Diploma
B. Bachelors degree
C. Master degree
D. PHD

Professional qualification (if any):

A. CA
B. CMA
C. CPA
D. Others ( )

Working experience in your field

A. Less than a year
B. From 1 to 3 years
C. From 3 to 6 years
D. From 6 to 9 years
E. More than 9 years

Work experience in this Industry

A. Less than a year
B. From 1 to 3 years
C. From 3 to 6 years
D. From 6 to 9 years
E. More than 9 years

Do you have any knowledge about Mergers, acquisitions and bankruptcy in

Jordan?
A. Yes
B. No

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PART TWO: ORGANIZATIONAL INFORMATION

Please answer the following questions with the most suitable answer
1. Does your organization see Mergers and acquisition as a way of expansion?
A. Yes
B. No

2. What is the type of your organization?

A. National
B. International (Based in Jordan)
C. Multinational (Branch in Jordan)
D. Others

3. Does your organization use Acquisition or Mergers as a way to raise stock

price?
A. Yes
B. No
C. Do not Know

4. Do you have any experience in the stock market?

A. Yes
B. No
C. Do not know

5. Is your company aware of the papers required to file for bankruptcy?

A. Yes
B. No
C. Do not Know

6. Have your company ever filed for bankruptcy?

A. Yes
B. No
C. Do not Know

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PART 3: PERSONAL JUDGMENT

HO1: There is no direct relationship between the cultural environment of the

merged or acquisitioned companies and the success of the merger/acquisition.
On a scale from 1 (Totally Disagree) to 5 (Totally Agree), please rate the following

Item 5 4 3 2 1
The existing customers will
stay with your Company
after merger.
The existing employees will
stay to work for you after
the Merger
Any Director or Officer of
the institution or any of its
subsidiaries has suggested
any mergers or Acquisitions
Mergers and acquisitions
have proven to develop
organizational culture
Organizational culture
effects the type of companies
to acquire or merge with

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 Mohammad-Al-Far

HO2: There is no direct relationship between mergers or acquisitions and the stock
price of either of the companies
On a scale from 1 (Totally Disagree) to 5 (Totally Agree), please rate the following

Item 5 4 3 2 1

Mergers and acquisitions

affect the market prices
Directors and managers
have inside information
about mergers and recent
acquisitions
The accelerated growth of
the acquiring company
affects the stock price
Stock price changes
surrounding the deal
announcement dates
Type of acquisition i.e.,
assets, stock, cash effects
the market

In your opinion, what is The Impact of Mergers, Acquisitions and filing for bankruptcy of the
market, the industry and the economy?

..

End of the survey

Thank you for your cooperation in this survey, for additional inquiries
please do not hesitate to contact the researcher at any time. (Contact
information will be provided separately)

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Mohammad-Al-Far

Results
It was subject for reliability of the data collected test using Cronbach's alpha standard.
Which depends on the consistency of the individual performance of a paragraph to
another, pointing to the strength of the link And relation between the paragraphs of the
scale, the degree of reliability of this questionnaire has reached on Cronbach's alpha
standard (0.635), which is a good percentage to adopt the results for this study. As the
alpha coefficient provides a good Estimate for stability for this tool, by taking in
accordance that the accepted percentage to generalize the results of such studies is 60%.

In regards to the limits adopted by this study, when commenting on the mean of the
variables in the study model and to determine the degree of understanding The
researcher has identified three levels of understanding (high, medium, low) based on the
following equation:

Category length = (upper limit of the alternative - the minimum alternative) / number of
levels

= (5-1)/ 3 = 4/3 = 1.33

Thus, the levels are as follows:

1- Lack of trust (low) 1 to less than 2.33

2- Medium trust (medium) 2.34 to less than 3.67
3- High degree of trust (high) 3.68 to 5

22 survey was tested, 30 distributed, 8 rejected due to random answering

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Mohammad-Al-Far

Sample reliability test frequency

Position in the organization

Valid Cumulative
Frequency Percent Percent Percent
Valid
CEO 1 4.5 4.5
CFO 1 4.5 4.5
first Auditor 2 9.1 9.1
Internal Auditor 1 4.5 4.5
IT Auditor 2 9.1 9.1
senior internal
1 4.3 4.3
Auditor
Senior Auditor 3 13.6 13.6
Senior Internal
2 9.1 9.1
Auditor
Senior Manager 8 36.3 36.3
Senior Risk
1 4.5 4.5
Manager
Total 22 100.0 100.0

Do you have any knowledge about Mergers and acquisitions in Jordan

Valid Cumulative
Frequency Percent Percent Percent
Valid
No 4 18.2 18.2
Yes 18 81.2 81.2
Total 22 100.0 100.0

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 Mohammad-Al-Far

Academic Major

Valid Cumulative
Frequency Percent Percent Percent
Valid
Accounting 13 59.1 59.1 58.3
Business
2 9.1 9.1 66.7
administration
Finance and
6 27.3 27.3 91.7
banking
Others 1 4.6 4.6 100.0
Total 22 100.0 100.0

Type of your organization

Valid Cumulative
Frequency Percent Percent Percent
Valid
international
(based in Jordan) 9 40.9 40.9

multinational
(branch in Jordan) 4 18.2 18.2

National 5 22.7 22.7

Others 4 18.2 18.2
Total 22 100.0 100.0

Mergers and acquisition as a way of expansion?

Valid Cumulative
Frequency Percent Percent Percent
Valid
Yes 22 100.0 95.8 100.0
Total 22 100.0 100.0

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 Mohammad-Al-Far

Working experience in your field

Valid Cumulative
Frequency Percent Percent Percent
Valid
1-3 years 1 4.6 4.6
3-6 years 4 18.2 18.2
6 -9 years 12 54.5 54.5
More than 9
5 22.7 22.7
years
Total 22 100.0 100.0

Work experience in Industry

Valid Cumulative
Frequency Percent Percent Percent
Valid
1-3 years 2 9.1 9.1
3-6 years 6 27.3 27.3
6 -9 years 10 45.5 45.5
More than 9
4 18.2 18.2
years
Total 22 100.0 100.0

Academic Degree
Valid Cumulative
Frequency Percent Percent Percent
Valid
Bachelors
8 36.4 36.4
degree
Master degree 14 63.6 63.6
Total 22 100.0 100.0

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 Mohammad-Al-Far

Does your organization use Acquisition or Mergers as a way to raise stock price

Valid Cumulative
Frequency Percent Percent Percent
Valid
Do not know 4 18.2 18.2
Yes 18 81.8 81.8
Total 22 100.0 100.0

Do you have any certificates?

Valid Cumulative
Frequency Percent Percent Percent
Valid
CA 4 18.2 18.2
CMA 2 9.1 9.1
CPA 11 50.0 50.0
Others 5 22.7 22.7
Total 22 100.0 100.0

Do you have any experience in the stock market?

Cumulative
Frequency Percent Valid Percent Percent
Valid
Yes
22 100.0 100.0
Total
22 100.0 100.0

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Mohammad-Al-Far

Tests

To test his hypothesis and his study on the Jordanian market, to test The Impact of

Mergers and acquisitions. The researcher finished the process of gathering Information,

which was collected by a questionnaire issued specifically for this purpose. A statistical

program (SPSS) Statistical Package for Social Sciences measured these data and

information provided by the sample participants from the Jordanian bank sector.

First: The study of descriptive statistics for the variables of the study by calculating,

(mean, standard deviations, and frequency distribution and percentages), in the purpose

of identifying the assessments of respondents for each of the statements contained in the

study, and to test the hypothesis.

Second: One sample t-test was adapted to bilateral comparisons to test hypothesis to

calculate the value of (T) to know the opinion of the study sample to measure the

possibility of a relationship between the independent variable and dependent variables.

According to these calculations, the hypothesis HO would have been rejected and

accepting the alternative hypothesis Ha if, the value of the calculated (t) was greater than

the critical value of (T), at (Sig.) 5% and the level of confidence of 95%.

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 Mohammad-Al-Far

Variables for H1

Variables for HO1 Level of trusting

Mean SDT. Deviation

The existing customers Medium

will stay with your
3.40 .8018
Company after
merger.
The existing employees Medium
will stay to work for
3.318 .8387
you after the Merger

Any Director or Medium

Officer of the
institution or any of its
3.673 .7673
subsidiaries has
suggested any mergers
or Acquisitions
Mergers and Medium
acquisitions have
3.345 .8985
proven to develop
organizational culture
Organizational culture Medium
effects the type of
3.245 .8985
companies to acquire
or merge with

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Mohammad-Al-Far

Variables for H2

Variables for HO2 Level of trusting

Mean SDT. Deviation

Mergers and 3.273 .7025 Medium

acquisitions affect the
market prices

Directors and 3.000 0.6574 Medium

managers have inside
information about
mergers and recent
acquisitions
The accelerated 2.909 .8729 Medium
growth of the
acquiring company
affects the stock price

Stock price changes 3.091 .8691 Medium

surrounding the deal
announcement dates

Type of acquisition i.e., 3.323 .880 Medium

assets, stock, cash
effects the market

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Mohammad-Al-Far

T-TEST

Where

x1 = Mean of first sample

x2 = Mean of second sample

n1 = Sample size (i.e., number of observations) of first sample

n2 = Sample size (i.e., number of observations) of second sample

s1 = Standard deviation of first sample

s2 = Standard deviation of second sample

sp = Pooled standard deviation

The calculated t value is then compared to the critical t value from the t distribution table

with degrees of freedom df = n1 + n2 - 2 and chosen confidence level. If the

calculated t value is greater than the critical t value, then we reject the null hypothesis.

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 Mohammad-Al-Far

T-TEST
Independent variable Calculated T Critical T Sig-t Statistical result

There is no direct 3.90 3.84 0.75 Reject HO1

relationship between the
cultural environment of the
merged or acquisitioned
companies and the success
of the merger/acquisition.

There is no direct 3.93 3.84 0.65 Reject HO2

relationship between
mergers or acquisitions and
the stock price of either of
the companies.

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Mohammad-Al-Far

Conclusion
After the intensive research done in writing this research paper, I will conclude it by
answering the research hypothesis which is as follows.

Hypothesis 1 (H1): there is no direct relationship between the cultural environment of

the merged or acquisitioned companies and the success of the merger/acquisition.

In most acquisitions and mergers the acquiring company appoints some of their existing
managers to manage the company being acquired, this causes many difficulties to the
managers who are forced to work in a completely new environment and culture which is
often the main reason behind the failure of failing acquisitions and mergers.

In H1 the calculated T (3.90) is higher than the critical T (3.84) so we reject

hypothesis 1, meaning that there is a direct relationship between the cultural
environment of the merged or acquisitioned companies and the success of the
merger/acquisition.

Hypothesis 2 (H2): there is no direct relationship between mergers or acquisitions and

the stock price of either of the companies.

The stock market reacts very quickly and rapidly to news, whether it is good or bad news.
And M&As are news that would almost definitely affect the company in many ways, and
thus affect the stakeholders of the company, that is why share prices often react very
quickly to such news.

In H2 the calculated T (3.93) is higher than the critical T (3.84) we reject hypothesis
2, meaning that there is a direct relationship between mergers or acquisitions and
the stock price of either of the companies.

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Mohammad-Al-Far

References

Barrett, P. F. (1973) the human implications of mergers and take-overs. London: Institute
of Personnel Management.

Berry, J. W., & Annis, R. C. (1974) Acculturative stress: The role of ecology, culture and
differentiation. Journal of Cross-cultural Psychology.

Galbraith, C. S., & Stiles, C. H. (1984) Merger strategies as a response to bilateral market
power. Academy of Management Journal.

Dyck, A., Zingales, L., 2004. Private benefits of control: an international comparison.
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Comment, R., Schwert, W., 1995. Poison or placebo? Evidence on the deterrence and
wealth effects of modern antitakeover measures. Journal of Financial Economics.

Bartels, J., R. Douwes, M. de Jong, and A. Pruyn (2006). Organizational identification

during a merger: Determinants of employees expected identification with the new
organization, British Journal of Management.

Ahuja, G., and R. Katila (2001). Technological Acquisitions and the Innovation
Performance of Acquiring Firms: A Longitudinal Study. Strategic Management Journal.

Agrawal, A. and J. Jaffe (2000). The post-merger performance puzzle, Advances in

Mergers and Acquisitions.

Haleblian, J. and S. Finkelstein (1999). The influence of organizational acquisition

experience on acquisition performance, Administrative Science Quarterly.

Hapeslagh, P. and D. Jemison (1991). Managing Acquisitions, Free Press, New York.
Haslam, S. A. and N. Ellemers (2005). Social identity in industrial and organizational
psychology: Concepts, controversies and contributions, in G. P. Hodgkinson and J. K.
Ford (eds.), International Review of Industrial and Organizational Psychology.

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