Popularity of mergers and acquisitions has grown, and they are increasingly used to seek growth and access routes to new market areas. Even though mergers and acquisitions represent a key cornerstone for companies to enhance operations, research regarding the subject is fragmented and results sometimes contradictory. Even though most of mergers and acquisitions fail to reach targets set prior, some companies appear to be more skilled in utilising M&As than others. Skillful executives can utilise imperfections of market valuations to benefit from too positive or negative valuation levels.

This thesis examines if companies can utilize mergers and acquisitions to create value for their shareholders. Data is collected to measure how merger and acquisition announcements influence stock prices of companies engaging in them. This data is then compared with a suitable benchmark to measure if value has been created. The chosen benchmark is the OMX25 Helsinki index, which represents stock price progression of the biggest and mostly traded Finnish companies in Helsinki stock exchange. There has been little research in value creation of mergers and acquisitions of Finnish companies, and this thesis aims to fill that void.

The empirical part of this research is conducted by using a quantitative analysis, while utilising time frame setting which is popular in event study method. Event study method remains a favoured and widely used method when measuring performance following major announcements, such as M&A news being published. As such, this this thesis examines stock price progression over a period of one month, with special emphasis placed on the first and fifth trading days of chosen time frame. Hypotheses are set to measure if companies can create value for their shareholders over chosen time frame.

The study finds that companies can create value for their shareholders. However, the results suggest that value is only created once, on the announcement day, after which value starts to be destroyed. This may be linked to transitory imperfections in market valuation levels due to risen volatility following the M&A announcement. Nonetheless, results are glaring, and shareholders can use M&A announcements to realize substantial profits. As such, shareholders are recommended to take an active stance with their shares if they are seeking to maximize their short-term profit.