As as the planned deal between Fiat and

Chrysler LLC is a private company and not quoted from 2007 to 2014, we do not
have stock price information of Chrysler during this M&A transactions.

Therefore, we analyze Fiat Group Stock Price (Ticker: FIATY) evolution before
and after the deal to illustrate market reactions.

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Figure 1: Fiat Group Stock Price
(FIATY) 50 days prior to 50 days after the deal completion


price reacted positively by the time of Chrysler restructure plan on April 25,
2009 (33 days before the deal). Restructuring plan gave a positive sign to the
market as the planned deal between Fiat and Chrysler was making progress.

Besides, Chrysler’s plan to restructure and redefine the scope of its
activities and geographic presence, initiated in prior years in response to
difficult market conditions, together with a series of temporary cost-cutting
measures, made it possible to limit losses from significantly lower business
volumes. Therefore, we expected the growth of stock price by the time of
announcement. Nevertheless, we can see in the figure 1 the signal of insider
trading as the stock price of Fiat surge up from late March (50 days before the
deal), far before the official announcement of Chrysler restructure plan. Remarked
stock price gained was recorded on March 31st with 10% increasing from
$6.32 to $7 with a higher volume than average.


After finalized agreement on
June 10, 2009, stock price decreased from $10.9 to $9.14 in 10 days then
gradually increased to $11.75 after 50 days. This was explained by the emerging
reorganization in the dark cloud of crisis
making investors temporarily suspect and ignore post-reorganized companies due
to bad memories, including losing real money, associated with the bankruptcy. Chrysler
was also hopelessly insolvent by the time the U.S. government got involved. Positive
increase of stock price came back after investors realized the potential
benefits of this global strategic alliance. The agreement granted the US
automaker access to Fiat technology, platforms and powertrains for small and
medium-sized cars, which were amongst the most innovative and advanced in the
world. This would enable Chrysler to expand its product offering with the
addition of low environmental impact models. Chrysler would also have access to
Fiat’s international distribution network. The alliance represented an
important step toward positioning both Fiat and Chrysler among the next
generation of leaders of the auto industry globally. However, the overall
increase was not dramatic but gradually, showing market scepticism and fearfulness
in this sensitive year.


Cumulative abnormal returns
(CARs) have been calculated according to the mean-adjusted method (Figure 2).

An estimation window ranging from 50 days before to 50 days after the deal
completion was used as suggested. We choose this range of window because the
calculated returns before and after the window were affected by other factors rather
than the transaction itself, one of them being the financial crisis.


Figure 2: Cumulative abnormal
returns of FIAT (FIATY) 50 days prior to 50 days after the deal completion (Source:
Our calculation is based on Yahoo Finance, Amigobulls)


the acquisition occurred in 2009 when a lot of companies, including the target
company, were in the verge of bankruptcy, combining an obvious involvement of
Obama government, it attracted strong attention from investors. Figure 2
clearly shows that there were significant abnormal returns three weeks before
the deal restructure announcement. (CAR 27-30%) which implies insider trading
as the information might be leaked before the official promulgation. On June
10, 2009 when the deal completed, the abnormal return was lower but still high
(CAR 20%), indicating that market became calmer yet there was still momentum of
surging returns. 10 days after the deal completion, there was almost no
abnormal return (CAR -0.3%), the trend line of CARs then still fluctuated but
more stable than before the transaction. It reflected a more efficient market, less
insider trading and showed investors expectation that the deal would benefit
both parties.