Performance of Scandinavian M&As: An Empirical Study

Marcus Erixson & Jacob Lykke Hansen

Student thesis: Master thesis


This thesis performs a quantitative study of the performance of synergies of mergers and acquisitions in the Nordic market. It investigates three hypotheses, each relating to a different variation of synergy when two firms combine into one by comparing pro forma pre-merger values to post-merger values of the merged entity. The results are analyzed and discussed against the latest M&A theory and research from earlier studies. The thesis bases its hypotheses on the two different perspectives in the M&A theory: the economic perspective and the finance theory. The two perspectives explain the various rationales and possible synergies for mergers such as: economy for scale, revenue enhancement, and tax benefits among others. The hypotheses test whether the synergies can be experienced after merging the firms with multiple performance measurements and in three different levels and: profitability, value creation, and financial synergies. The results are based on the tests statistics from the one and two sample t- tests, the Wilcoxon Signed Rank test and finally a cross-sectional regression is made to further aid or dismiss the findings from the statistical tests. Further, the performance is divided into three groups: Full sample, Scandinavian versus World deals, and related versus unrelated deals. A sample of 137 M&A deals with public firms from Denmark, Finland, Norway, and Sweden are examined. The deals were collected in the period from 1995-2011 due to need of data five years prior to the deal and five years after the deal. The results of the thesis was mixed. For the profitability measures, the EBITDA margin showed a significantly positive effect while the revenue growth was significantly negatively affected. In the sense of value creation, cash flow return scaled by market value of assets significantly after the merger, together with the capital expenditure ratio. The working capital ratio and Tobin’s Q experienced a significantly decrease. For the financial synergies, it was possible to see that the tax shield was significantly lower after the merger. The thesis does not investigate why results does not completely follow the theory, as it is beyond the scope of the thesis but suggests some recommendations for further research. In future studies, a more qualitative approach than the thesis’ quantitative approach could be used to see why and where the mergers fail to create synergies and to what extent the managers responsible for the M&A deals act in the shareholders’ best or persecute personal glory.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2017
Number of pages127
SupervisorsBjörn Preuss