What’s Really in a Deal? Evidence from Textual Analysis of M&A Conference Calls

Using a sample of 814 transcripts from 2011 to 2018, we examine information within merger and acquisition conference calls. Textual analysis reveals significant differences between the content of M&A call transcripts and both contemporaneous corporate press releases and earnings conference calls. We find participation of target executive types in M&A calls is related to payment choice and consistent with managerial incentives. Appearances of target executives are associated with a negative market reaction which is attributed to retention of these executives. We also identify a negative relation between textual sentiment and market reaction consistent with a response to higher levels of information asymmetry. Greater quantitative information, however, is positively related to the market reaction of M&A calls. We develop an M&A motive dictionary to identify financial and strategic content within call transcripts. Consistent with prior literature on merger motivation, deals with more finance (strategy) oriented words have a higher (lower) market reaction. Overall, our results show that deal-related textual analysis explains a highly significant and economically important component of gains/losses to acquirers.