M&A in the Nordics: How Strategic Patterns Drive Sustained Value Creation

Adam Johan Alfred Ring & Carl Viktor Sebastian Westinius

Student thesis: Master thesis

Abstract

The mergers and acquisition (M&A) literature is extensive and rapidly growing in line with the acquisition market. However, the discussion of whether M&As are effective in creating value is intensely contested, with a variety of opposing views and findings. Considering the size of the Nordic M&A market, surprisingly little evidence exists on the performance of Nordic acquirers. Furthermore, the scarcity of research assessing the performance of a program-level strategy is even more pronounced within this context. Through a sample of 2,328 Nordic transactions from 2001-2022, this thesis investigates the impact of strategic patterns on sustained value creation by formulating four strategies (Programmatic, Large deal, Selective, and Diminutive). The strategy typology combines different characteristics in terms of acquisition frequency and size. To assess the relative value creation, a long-term event study is conducted and supplemented with a regression analysis incorporating well-documented value drivers as control variables. The study employs a multitude of time lags and an amalgamation of seven market- and operating performance measures to provide a more detailed and encompassing assessment of value creation. The thesis contributes to the current M&A literature with the following findings: (1) In the Nordics, M&A creates positive long-term abnormal acquirer stock market returns, albeit negative long-term abnormal acquirer profitability. (2) From a market perspective, the programmatic strategy creates significant value, whereas the selective and diminutive strategy deplete value. In this connection, the large deal strategy creates value, although the results are insignificant. (3) From an operating perspective, the programmatic strategy yields significant value depletion. The diminutive strategy looks to deplete value, whereas the large deal and selective strategy create value, although these findings are insignificant. (4) Overall, the large deal strategy exhibits the greatest potential for value creation, followed by the programmatic strategy, the selective strategy, and the diminutive strategy. When adopting previously documented value drivers to assess the robustness of the findings, (5) acquirer size, valuation, macroeconomic context, and bidder-target relatedness seem to play a significant role in explaining abnormal market- and operating performance, whereas target-target relatedness, means of payment and cross border transactions hold less explanatory power in a Nordic context.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date15 May 2023
Number of pages141