Value Creation of Serial Acquirers in Mergers & Acquisitions: An empirical investigation of short-term value creation and value drivers of serial acquirers in Sweden

Abstract

Literature investigating M&A is extensive, however less so when narrowing the scope to serial acquirers. Surprisingly little evidence exists from Sweden, despite the unique nature of Swedish serial acquirers characterized as M&A compounders and strategic acquirers. The thesis attempts to fill the gap by investigating 1,335 M&A announcements from 2011-2021 by conducting a short-term event study supplemented with a cross-sectional regression analysis displaying the robustness of the results.
Literature displays consensus regarding that target shareholders experience high abnormal returns, while evidence of acquirer returns is inconsistent. Neoclassical economic theory explains M&A as value additive under the rationale that managers aim to maximize shareholder wealth. The behavioral theory attempts to address the lack of evidence regarding value creation through theories such as agency theory, learning hypothesis, hubris hypothesis, and signaling.
The findings of this thesis contribute to academia with the following main findings: (1) Serial acquirers in Sweden experience abnormal returns of 0.88% in the short-term. (2) M&A compounders experience greater abnormal returns of 1.07% compared to strategic acquirers experiencing abnormal returns of 0.83%. A possible explanation is that M&A compounders that attempt to obtain synergistic financial motives generate greater value, and acquisitions aiming for operational or collusive synergies overpay for target firms. (3) Acquirers characterized as joggers, runners, or sprinters based on acquisition frequency all experience abnormal returns; however, it is evident that abnormal returns decrease with increased frequency. (4) M&A compounders acquiring privately-held targets outperform acquisitions of listed targets by 1.74%, while no evidence of abnormal return sensitivity to target status is found for strategic acquirers. (5) No evidence is found to support M&A compounders’ sensitivity to means of payment, whilst evidence suggests that cash offers are associated with higher announcement returns for strategic acquirers. (6) No evidence is found to support that cross-border acquisitions yield any different wealth effect compared to domestic acquisitions for the respective groups in the short-term.