Mergers and Acquisitions within the Freight Shipping Industry: An Acquirers Perspective

Kent Gustav Alexander Klingensjö & Ole Kristian Waitz

Student thesis: Master thesis

Abstract

The shipping industry has been struggling ever since the financial crisis of 2008. Before the crisis, vertical integration offered sizable firms in this industry a possibility to achieve a more efficient value chain by integrating vital operations, e.g. cargo handling and harbor operations. However, such value creating activities today offers little support to the troubled firms since most of these operations already have been integrated. The industry has, in an attempt to once again become more profitable, ever since 2014 started consolidating horizontally. The purpose of this study aims at investigating if these consolidating activities are value creating to the acquirers seeking operational synergies. It investigates whether horizontal mergers and acquisitions in the freight shipping industry are value creating to acquirers and attempts to explain this value creation. Previous research is scarce and has been unable to present definitive conclusions to this problem statement.
The study uses a mixed research methodology by applying both cases and empirical testing to generate robust hypotheses and results. The intention with using this type of methodology is to leverage the findings in the literature review with the cases in order to present relevant and grounded hypotheses. These hypotheses are then empirically tested using an event study approach and a sample of 143 horizontal mergers and acquisitions within the freight shipping industry. The event study aspires to make the findings in the case study and literature review more generalizable.
The results of the event study indicate that it is on average value creating for acquirers to consolidate horizontally in the freight shipping industry. Hence, abnormal returns in the event window around the announcement are positive. Furthermore, the results also indicate that acquirers with higher levels of leverage prior to the merger or acquisition on average create less value than firms with lower levels of leverage. The implications of the results are that firms with high levels of leverage in the freight shipping industry should act with caution before considering consolidating in order to achieve operational synergies.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages121
SupervisorsCaspar Rose