Bankruptcy Acquisitions in Europe: An Empirical Analysis of a Value Creating Strategy

Raphael Karl Roderich Nitz

Student thesis: Master thesis


This thesis provides evidence that takeovers can be a value creating strategy for the acquirer. Depending on the circumstances especially the focus on bankruptcy acquisitions can be of high interest for an acquirer. 14,495 recent takeovers within years of 2008 and 2014 in the euro zone have been examined and the results provide empirical evidence that acquisitions can facilitate a value creating effect for the acquirers. Here, acquirers of bankrupt firms often have some previous relationships along their value chain to the target company which suggests that the acquirers are well informed about the possible value extraction and utilization of the target‘s assets. However, within the examined transactions, findings show that in Europe between 2008 and 2014 non-bankruptcy acquisitions outperformed the bankruptcy transactions. But this performance of bankruptcy acquisitions is time-specific. Firms that are able to acquire bankrupt firms even within a troubled economic cycle must be financially very stable and gain from their strong bargaining power within such an environment. They are able to earn excess returns upon deal announcements of 1.66 percentage points compared to buyers within the post-crisis situation. This evidence is in line with the opinion that some companies can take advantage of fire sales by bankrupt companies as part of a corporate restructuring. In addition, the type of the bankruptcy acquisition is of great importance as its performance is also industry-specific. Based on the fixed assets and their recovery values as well as their obvious synergies potentials bankrupt manufacturing companies seem to be fruitful. Within the examined event window, bankruptcy acquisitions of manufacturing firms received 4.56 percentage points higher cumulative abnormal returns compared to bankruptcy non-manufacturing acquisitions. The market strongly appreciates these types of acquisitions with high abnormal returns.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2016
Number of pages87