Værdiskabelse i fusioner og akkvisitioner

Josephine Tauning & Joakim Engstrøm

Student thesis: Master thesis

Abstract

Over recent decades, there has been an increasing trend in the number of M&A transactions worldwide. On the other hand, university textbooks have stated that the acquiring company will not create value in the transaction. This ambiguity has generated an interest in examining how M&A transactions in the European and the American markets have created value for the acquiring company’s shareholders during the period 2008-2017. To further investigate this research question, four sub-questions have been created, which seeks answer to the overall value creation, the influence of the capital decision, the effect of the acquiring company’s financial condition and the strategic choices. This thesis examines the short-term effect of M&A transactions on the acquirer through event study methodology, in which the market model is used to calculate the abnormal return in an event period consisting of  5 days of the announcement day. To test whether the abnormal return for each hypothesis variable is significant this thesis applies a cross-sectional t-test and a sign-test. At last, a multiple linear regression is applied in order to test all hypothesis variables together. The results of the analysis show that the acquiring company achieves value creation in the period which applies for both the European and American acquirers. Within the capital decision payments containing both stock and cash generate the highest value creation, whereas using stock payments exclusively are value neutral in the U.S. and value destroying in Europe. Financing the transaction with debt turned out as being the most value creating factor of all. Additionally, the use of internal resources did only lead to value creation in Europe. By the financial condition of the acquiring company, low free cash flows only create value in the U.S., while high free cash flow generates value in Europe. If the acquiring company has a high probability of bankruptcy, it did not create value. Opposite, there is value creation for low probability of bankruptcy and companies in the gray area. With the strategic choice, no difference was found in the value creation between diversified and focused transactions as well as between cross-border and domestic transactions. The only difference found was that cross-border only created value on the European market while created no value on the American market. Through the use of multiple regression, it was possible to support the impact on the value creation of the hypothesis variables and further demonstrate that both size of the transaction and the year the transaction is announced will have an impact on the value creation as well.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2019
Number of pages136