Shareholder Value Creation in European M&As

Abstract

"This paper looks at the value generated to shareholders by the announcement of mergers and acquisitions involving firms in the European Union over the period 1998-2000. Cumulative abnormal shareholder returns due to the announcement of a merger reflect a revision of the expected value resulting from future synergies or wealth redistribution among stakeholders. Target firm shareholders receive on average a statistically significant cumulative abnormal return of 9% in a one-month window centred on the announcement date. Acquirers' cumulative abnormal returns are null on average. When distinguishing in terms of the geographical and sectoral dimensions of the merger deals, our main finding is that mergers in industries that had previously been under government control or that are still heavily regulated generate lower value than M&A announcements in unregulated industries. This low value creation in regulated industries becomes significantly negative when the merger involves two firms from different countries and is primarily due to the lower positive return that shareholders of the target firm enjoy upon the announcement of the merger. This evidence is consistent with the existence of obstacles (such as cultural, legal, or transaction barriers) to the successful conclusion of this type of transaction, which lessen the probability of the merger actually being completed as announced and, therefore, reduce its expected value". Copyright Blackwell Publishers Ltd, 2004.

Merger Impacts on Investor Expectations: An Event Study for Australia

“…Both of these results are smaller than the investors' reaction to domestic mergers over the same time period, suggesting some apprehension to cross-border mergers. 10 This is consistent with Campa and Hernando's (2002) findings that the wealth effects of European cross-border mergers are less than the abnormal returns to domestic mergers, although contrary to the findings of Harris and Ravenscraft (1991) for US crossborder mergers.…”

An Analysis of Short-Term Performance of UK Cross-Border Mergers and Acquisitions by Chinese Listed Companies

“…Grouping the research of performance into bidder and target sides, the target firm's performance is always positive (Roll, 1986;Campa and Hernando, 2004). But there still is no agreement on the performance of the acquirer.…”

“…For example, some studies have found that the short-run performance of target firms is positive and significant (Bruner, 2002 andCampa andHernando, 2004). The positive value effect on target shares is logical as the bidders typically pay premiums to target shareholders in order to compensate them to give up control rights.…”

Competition and regulation in retail banking

“…A recent paper by Campa and Hernando (2004) suggests that barriers that are outside the control of banks play a role. Their study shows that the combined economic returns of acquirer and target (the combined cumulative abnormal returns of M&As) are typically lower in industries, such as banking, that until recently were under government control or are still or were most heavily regulated.…”

“…Selon une étude récente publiée par Campa et Hernando (2004), des barrières extérieures au contrôle des banques jouent un rôle en la matière. Il apparaît que la performance boursière combinée de l'acquéreur et de la cible (performance boursière combinée des fusions-acquisitions) est généralement inférieure dans les secteurs, comme le secteur bancaire, qui étaient jusque récemment, contrôlés par l'État, qui sont encore ou étaient les plus réglementés.…”