| Marketing activities are designed and executed to increase brand equity. The financial benefit derived from brand equity is defined as brand value. In this dissertation, a brand valuation model and a new brand value measure are proposed in the context of mergers and acquisitions. The data is collected from Thomson ONE Banker Mergers and Acquisitions database, SEC filings, COMPUSTAT database, CRSP database, and USPTO's trademark database. To be included in the sample, a merger and acquisition deal has to have a US-based target firm in a consumer product and service related industry and a US-based acquiring firm. All deals are completed between January 1, 2001 and June 30, 2010 and the acquiring firm reported the brand value for a target firm in their SEC filings. The sample has 98 merger and acquisition deals. Bahadir, Bharadwaj, and Srivastava (2008) used the dollar amount the acquiring firm assigned to the target firm's brand to represent brand value, and developed a brand valuation model with capability and strategic fits between acquiring and target firms. First, I extend their model with Ohlson's valuation approach (1995). Results show that target firm characteristics explain more of the variability in brand value than acquiring firm characteristics. Second, a new measure of brand value is proposed based on shareholders' value for the brand. An event study methodology based on Brown and Warner (1980, 1984) with Carhart's (1997) four-parameter risk adjustment specification is used. Changes in acquiring firm stock returns due to acquisition announcements are further adjusted to the brand level. The brand valuation model with this new measure shows substantially greater explanatory power than the model with the previous measure of brand value. Validity of using shareholders' value is largely supported by the results of this study. |
