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Value Creation in (Serial) Acquisitions - The Nordic Evidence

Gustavsson, Axel LU and Möllerström, Carl LU (2022) NEKN02 20221
Department of Economics
Abstract
Evidence of value creation for acquiring companies is revealed by a Nordic sample of acquisitions. The sample of 171 acquisitions, involving 130 acquirers, allows for investigating the performance of companies making several acquisitions. Such serial acquirers also generally create value, but to a lower extent and with a negative trend for each additional acquisition. It is found acquirers gain an average abnormal return of 3.25%, 2.75% and 3.09% in event windows t±1, t±2 and t±3 respectively upon deal announcement. Furthermore, we find single acquirers exhibit a larger average abnormal return than serial acquirers, and correspondingly, we find that value creation tend to decrease with the deal sequence in a logarithmic pattern. By... (More)
Evidence of value creation for acquiring companies is revealed by a Nordic sample of acquisitions. The sample of 171 acquisitions, involving 130 acquirers, allows for investigating the performance of companies making several acquisitions. Such serial acquirers also generally create value, but to a lower extent and with a negative trend for each additional acquisition. It is found acquirers gain an average abnormal return of 3.25%, 2.75% and 3.09% in event windows t±1, t±2 and t±3 respectively upon deal announcement. Furthermore, we find single acquirers exhibit a larger average abnormal return than serial acquirers, and correspondingly, we find that value creation tend to decrease with the deal sequence in a logarithmic pattern. By discarding the theory of diminishing returns as an explanation, we instead reveal possible agency problems in the Nordics. Conversely, we reject the organizational learning hypothesis and capitalization hypothesis. Our study suggests that acquisitions can be fruitful for shareholders of bidding firms, yet merely so with the restriction of a single or few deals. The implications of our study is that shareholders in this region can benefit greatly from enhanced corporate governance. (Less)
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author
Gustavsson, Axel LU and Möllerström, Carl LU
supervisor
organization
course
NEKN02 20221
year
type
H1 - Master's Degree (One Year)
subject
keywords
M&A, serial acquirers, agency problems, value creation
language
English
id
9085893
date added to LUP
2022-10-10 09:34:12
date last changed
2022-10-10 09:34:12
@misc{9085893,
  abstract     = {{Evidence of value creation for acquiring companies is revealed by a Nordic sample of acquisitions. The sample of 171 acquisitions, involving 130 acquirers, allows for investigating the performance of companies making several acquisitions. Such serial acquirers also generally create value, but to a lower extent and with a negative trend for each additional acquisition. It is found acquirers gain an average abnormal return of 3.25%, 2.75% and 3.09% in event windows t±1, t±2 and t±3 respectively upon deal announcement. Furthermore, we find single acquirers exhibit a larger average abnormal return than serial acquirers, and correspondingly, we find that value creation tend to decrease with the deal sequence in a logarithmic pattern. By discarding the theory of diminishing returns as an explanation, we instead reveal possible agency problems in the Nordics. Conversely, we reject the organizational learning hypothesis and capitalization hypothesis. Our study suggests that acquisitions can be fruitful for shareholders of bidding firms, yet merely so with the restriction of a single or few deals. The implications of our study is that shareholders in this region can benefit greatly from enhanced corporate governance.}},
  author       = {{Gustavsson, Axel and Möllerström, Carl}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Value Creation in (Serial) Acquisitions - The Nordic Evidence}},
  year         = {{2022}},
}