Horizontal and vertical takeover and sell-off announcements: Abnormal returns differ by industry

Abstract

We begin with the hypothesis that shareholder-wealth effects of corporate transactions differ depending on (a) the specific industry, (b) whether they are horizontal or vertical, and (c) whether they are integrations (takeovers) or disintegrations (partial sell-offs). A standard event study analysis for cumulative abnormal returns based on the market model is conducted for 309 data-points from 227 transaction announcements. We find that abnormal returns indeed do significantly depend on the transaction profile (horizontal vs. vertical and integration vs. disintegration) and industry. One main result is the observation that the capital market shows distinctive preferences for either an integration or disintegration strategy for vertical as well as for horizontal transactions. The specific pattern of this preference differs according to industry

Beginning Consolidation in the Renewable Energy Industry and Bidders’ M & A-Success

“…Cummins and Weiss [9] and Beitel et al [10] provide evidence on the positive returns to acquirers for transactions in the financial services industry (insurance and banking, respectively). Gross und Lindstaedt [11] document positive acquirer returns for the automotive, media, telecom, financial services and pharma/chemical industries, albeit with a sample constructed from a relatively narrow and potentially upward-biased time period (Jan '98 -Aug '01).…”

Value creation and division of gains in horizontal acquisitions in Europe: the role of industry conditions

“…Goergen and Renneboog (2004), for example, find that target as well as bidder abnormal returns in 187 European M&As during 1993-2000 are higher in manufacturing and in retailing industries. Gross and Lindsta¨dt (2005) report that bidder returns in 227 horizontal M&As in Europe and in the USA during 1998-2001 are significantly larger in automotive, media and telecom industries. Nonetheless, the question what is driving these cross-industry differences in M&A value creation remains largely unsettled to date.…”