Valuation of intangible assets in mergers and acquisitions: Event study approach

This article studies the impact of merger or acquisition on intangible assets of acquiring company in intangibles-intensive industry and observes the opportunity of simplifying the appraisal of such assets by using market indicators coupled with operational performance data. The short-term analysis reveals that excess stock volatility in the announcement-to-merger period and insider trading-induced volatility in two days before announcement skew the regression analysis prediction power and that probable CAR corridor in this period widens twofold if compared to the analogous period after the close date of the M&A deal. Nevertheless, it is evident that cumulating average abnormal returns and comparing them with IA/Cap. ratio in the long-term we can with a higher probability and less effort predict future value of intangible assets in mergers.