Analysis of Effects in Capital Markets Resulting from Mergers: The BRF Case

This study investigated the possible effects on the capital markets that occurred before, during and after the merger between Sadia and Perdigão (new BRF) announced on May 19, 2009. Through event study analysis this research reports, analyzes and presents the behavior of abnormal returns in eight selected events in different periods, both for the two companies included in the merger process as well as for their main competitors in the market. The events were divided into six related to the merger and acquisition and two unrelated to the M&A. The most statistically and economically significant results came from the events related to the merger. There were positive and statistically significant abnormal returns for both the acquiring company and the acquired company. Returns for the acquired firm were higher than the returns of the acquiring company. Another result that this study showed was that the merger resulted in higher stock prices for rival firms in all periods analyzed, showing positive and significant abnormal returns. This result is in line with the acquisition probability hypothesis.