M&A værdiskabelse i Europa: Et empirisk studie af den kortsigtede værdiskabelse for vesteuropæiske ’publicto- public’ transaktioner i perioden 2000 til og med 2019

Andre Lerche Møller & Jakob Torp

Student thesis: Master thesis


The main purpose of this thesis is to investigate the short-term mergers & acquisitions (hereafter M&A) value creation in Western Europe for public-to-public transactions over the time period 2000 to 2019. M&A activity has gradually become a more popular expansion strategy compared to simply focusing on organic growth. However, macroeconomic tendencies seem to have a significant effect on the M&A activity levels. Hence, this thesis seeks to further investigate the impact of these market fluctuations. Specifically, two financial crises are included in this thesis; the Dot-com bubble in 2000 and the financial crisis in 2008. Both crises are of great relevance in relation to the ongoing crisis caused by Covid-19, which might put an end to the 7th global M&A wave. This thesis contributes to the existing literature by investigating how numerous parameters affect the overall value creation in M&A transactions. It simultaneously illustrates how the relative synergy distribution between acquiror- and target companies has developed over time. A thorough empirical analysis of 343 M&A transactions, solely consisting of publicly listed European companies, is conducted by applying the event study methodology. The value creation is measured using capital market information, i.e. stock returns, measured around the announcement date. The event windows used are [-1; +1], [-3; +3], and [-10; +10] days. Additionally, this thesis utilizes three different models to estimate the cumulative abnormal return (CAR): 1) the market model, 2) constant mean return (CMR), and 3) the capital asset pricing model (CAPM). Furthermore, two different indices are used to estimate the market returns and beta values: 1) local indices for each country, and 2) a broad European index. Subsequent to computing the CAR-values, parametric statistical tests are applied to test the abnormal returns, while a comprehensive multiple linear regression (MLR) is conducted to investigate which factors affect CAR. Consequently, the findings derived in this thesis provide new insights into the short-term value creation for M&A transactions and are summarized below: The results from hypothesis one show that shareholders of both acquiror- and target companies obtain significant, positive CAR-values when using the event window [-1; +1] day. However, by extending the event window to [-3; +3] and [-10; +10] days, only target companies obtain significant, positive results. Moreover, by comparing the results from all three models applied it becomes clear that the results do not deviate substantially. Thus, only the market model, the European index, and the event window [-10; +10] days are applied going forward in the empirical analysis. The total combined CAR for both acquiror- and target companies reveals to be significant and positive at a 1% level, using the event window [-1; +1] and [-3; +3] days. The MLR method applied in hypothesis two returns significant results for numerous parameters, including: financial crises, relative size, method of payment, country, industry classification, financially distressed companies, and deal status. Lastly, hypothesis three indicates that over the past twenty years, shareholders of target companies have captured, on average, 58.91% of the value of synergies, due to increasing stock prices around the announcement date.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2020
Number of pages155