| 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 |