Value Creation in Western European Health Care M&A: An Event Study of Short-Term Stock Market Reactions and Their Determinants

Abstract

This thesis investigates the short-term value creation of mergers and acquisitions (M&A) in the Health Care sector, focusing on whether acquiring firms experience value creation or destruction around the announcement date. The study applies an event study methodology to estimate cumulative abnormal returns for each transaction, followed by a cross-sectional regression analysis to identify which firm-, deal-, and market-specific characteristics explain the variation in value creation. The findings indicate that, on average, M&A announcements are associated with short-term value creation for acquirers. Specifically, value creation is positively associated with transactions conducted during crisis periods and those involving diversification. Conversely, negative correlations are observed for deals involving cash payment, private targets, and cross-border transactions. No strong relationship was found between value creation and the macroeconomic environment of the target country, the relative valuation of the acquiring firm, or firms with previous M&A success. These results have practical implications for both investors and corporate managers. Investors may use these characteristics to anticipate stock price reactions around deal announcements, while managers can better assess strategic considerations when planning M&A activity in a sector characterized by heavy regulation and ongoing consolidation. This study contributes to the M&A literature by focusing on the underexplored Western European Health Care sector and by introducing three relatively novel explanatory variables: a crisis period indicator, a prior M&A success measure, and target-country GDP growth. As the role of Health Care firms in the global economy continues to expand, understanding the value drivers behind M&A outcomes in this sector becomes increasingly important.