nep-ind New Economics Papers
on Industrial Organization
Issue of 2006‒04‒01
one paper chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Mergers and Acquisitions in Europe By Martynova,Marina; Renneboog,Luc

  1. By: Martynova,Marina; Renneboog,Luc (TILEC (Tilburg Law and Economics Center))
    Abstract: This paper provides a comprehensive overview of the European takeover market. We characterize the main features of the domestic and cross-border corporate takeovers involving European companies in the period 1993-2001. We provide detailed and comparable information on the size and dynamics of takeover activity in 28 Continental European countries, the UK and Ireland. The data is supplemented with the characteristics of takeover transactions, including the type of takeovers (negotiated acquisition or tender offer), bid attitude (friendly or hostile), payment method (all-cash, all-equity, or mixed deals), legal status of the target firm (public or private), takeover strategy (focus or diversification), amongst other factors. In addition, we investigate the shortterm wealth effects of 2,419 European mergers and acquisitions. We find announcement effects of 9% for target firms compared to a statistically significant announcement effect of only 0.5% for the bidders. Including the price run-up, the share price reaction amounts to 21% for the targets and 0.9% for the bidders. We show that the estimated shareholder wealth effect strongly depends on the different attributes of the takeovers. The type of takeover bid has a large impact on the short-term wealth effects for the target firm shareholders with hostile takeovers triggering substantially larger price reactions than friendly transactions. When a UK target is involved, the abnormal returns are higher than those of bids involving a Continental European target. There is strong evidence that the means of payment has a large impact on the share prices of both bidder and target
    Keywords: takeovers;mergers and acquisitions;diversification;takeover waves;means of payment
    JEL: G34
    Date: 2006
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:20063&r=ind

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