Transaction Premium Determinants: Empirical Examination of Corporate Control Drivers in Global Public M&A Transaction Premiums between 2002-2014

Steffen Tjerrild-Hansen

Student thesis: Master thesis


The objective of this thesis is to extend the existing knowledge on how corporate control determines and impact global public M&A transaction premiums. The empirical ndings are based on a data sample containing 7931 global public M&A transactions occurred between January 1st 2002 and December 31th 2014. The ndings of the thesis show that corporate control not only by itself has a signi cant impact on transaction premiums, but the relationship between corporate control and transaction speci c- and macroeconomic factors explains more of transaction premiums than control alone. Theoretical reasoning presented by Damodaran (2010), showed that a substantial amount of global rms are subject to managerial ine ciencies, not allocating their corporate resources optimally. The empirical examination illustrated that acquisitions of underperforming target rms on average are associated with +9.44% point higher transaction premiums, when acquiring rms simultaneously gain control over the company. Furthermore, very limited research has investigated the relationship between control and transaction synergies and the combined explanatory power of transaction premiums. The empirical results showed transactions associated with change-of-control and synergies on average are subject to +7.52% point higher transaction premiums. Previous research have examined whenever macroeconomic conditions impact transaction premiums. This thesis extends the hypothesis and tests whenever there not only exist a relationship between macroeconomic factors and transaction premiums but also whenever corporate control is related to macroeconomic indicators. The empirical examination reveals a statistical signi cant relationship. However, the parameter stability and robustness analysis shows that the results only are consistent for the full data sample and not on a post-crisis data sample. This study contributes to the existing literature by showing fundamental theoretical and empirical evidence that corporate control and the relationship with synergies and underperformance consistently have a positive explanatory power of public M&A transaction premiums across di erent macroeconomic paradigm shifts, geographical regions, industries and transaction sizes.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2015
Number of pages124