How Do Mergers and Acquisitions Affect Performance of the Target Firms: The Evidence from the Baltic States

Agne Lipeikyte

Student thesis: Master thesis


Mergers and acquisitions have attracted a lot of attention from the researchers as they have important strategic, monetary, and policy implications. The findings of empirical research highly depend on methods, data, and measures used, thus provide wide range of findings, therefore it is difficult to reach consensus in the theory. Moreover, with the most attention given to the large public companies from developed countries, some areas of the M&As activity remain under-researched. Therefore, this study concentrates on the Baltic States, which are dominated by small and medium companies. Thus, it is expected to complement M&As research field with some new insights on how well the M&As theories apply in the context of small, transition economies. The primary interest is to investigate how mergers and acquisitions affect post-acquisition performance of the target companies from the Baltic States acquired in years 2008-2010. Also, in order get a full view, pre-acquisition productivity is also evaluated to give additional insights on motives of companies engaging in M&As. The large sample of company level data from three Baltic States was generated containing 206 acquisition targets, which changed ownership during 2008-2010 years period and sample of 15 920 non-acquired companies. Three different models were constructed with various dependent and independent variables and models were estimated using logit regression, ordinary least squares (OLS), and generalized least squares (GLS) methods. GLS method was chosen in order to account for such panel data issues as heteroskedasticity and autocorrelation. The results obtained indicate that acquisition targets with higher productivity are more likely to experience ownership change. Furthermore, acquisition targets are more productive in post-acquisition period compared to non-acquired firms. When it is differentiated between foreign and domestic acquirers, there is no significant evidence that foreign acquirers are related to better performance of the targets. Contrary, there is weak evidence that domestic acquirers are able to choose better performing targets. Finally, sample is broken into three subsamples of small, medium, and large companies, and results imply that SMEs are more productive in pre-acquisition stage and have further improvement in productivity relative to the non-acquired companies of the same size. Large acquired companies do not differ in pre-acquisition stage from non-acquired companies and have no significant productivity improvements in post-acquisition stage.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2015
Number of pages68