Short-term Value Creation from M&A Announcements in the Nordic Market

Abstract

The aim of this thesis is to investigate whether there has been a short-term value creation from M&A announcements in the Nordic market from 2000 to 2019. Several academic papers have been con-ducted in the U.S., UK and Europe, but only limited empirical evidence exists in the Nordic market. The historical M&A activity level shows a clear trend that M&A has become a popular and recognized method of firms to grow. The main driver of value creation in M&As is synergies cf. neoclassical theory, whereas behavioural theory aspects, such as agency problems, managerial hubris, signalling-, and leverage effect may destroy shareholder wealth. By extension, neoclassical- and behavioural theory disagree on the efficiency of markets. This paper’s findings show abnormal return to target shareholders in the days after the M&A announcement, which indicates that the market does not efficiently absorb all information immediately. Moreover, abnormal return to target shareholders in the days prior to the M&A announcement, demonstrates that the share prices reflect information that is not yet publicly available, which contradicts the semi-strong market efficiency. Therefore, this paper argues that the Nordic market lies in a grey-zone between semi-strong and strong market efficiency. Finally, it is concluded that M&A announcements in the Nordic market from 2000 to 2019 have resulted in average short-term abnormal return of 25.3% to target shareholders based on 144 M&A transactions, whereas the empirical evidence for acquirer shareholders is limited.