M&A Value Creation in the European Market

Ahmad Raad & Hilal Aydin

Student thesis: Master thesis


The aim of this paper is to analyze if intra-European M&A announcements generate shareholder value in a short-term event window around the day of the announcement. For this purpose, the event study methodology is used to examine the stock price reaction of 646 M&A announcements in the period 2015 to 2020 for listed acquiring firms. On average, acquiring-firm shareholders value is significantly affected by M&A announcements as the cumulative average abnormal return (CAAR) in the three-day event period (-1, +1) is +1,93% for the whole sample. Several factors have been identified to have a significant influence on shareholders’ value. The findings on this matter can be summarized in the following six points. (1): Horizontal and diversified acquisitions have a significantly higher CAAR than vertical acquisitions. (2): CAAR is insignificantly different between domestic or cross-border transactions. (3): CAAR is insignificantly different between cash, stock, or hybrid payments. (4): The public status of the target-firm influences CAAR, as acquisitions of private target-firms generate a significantly higher CAAR than public target-firms. (5): When the relative size between the acquirer and target firm increases, a significant increase is CAAR is found. (6): There were no significant differences in CAAR when examining M&A announcement reactions in the period before and after the COVID-19 crisis. Finally, the paper evaluates its methods and the validity of its findings in relation to existing theories and empirical evidence from previous studies. The applied method can effectively be used to measure the effect on shareholders’ value and the factors that significantly influence it. However, the applied method and the existing literature in general struggle to isolate the effects and develop theories on why shareholders value is affected as it is. This issue is further complicated, as the existing literature uses a variety of methods to investigate the effects of M&A announcements, which makes it difficult to compare findings between studies.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2021
Number of pages134