Capital markets and performance of strategic corporate M&A – an investigation of value drivers

• Veronika Vinogradova ^[1]
  1. [1] HSE University, Moscow
• Localización: European journal of management and business economics, ISSN-e 2444-8494, ISSN 2444-8451, Vol. 30, Nº. 3, 2021, págs. 67-95
• Idioma: inglés
• Enlaces
  • Texto completo
• Resumen

  • Purpose – The paper investigates the market performance of strategic acquisitions for growth in the fifth and sixth merger waves and outlines the major determinants that affect the performance of acquiring companies in these most complex and most challenging corporate transactions.

    Design/methodology/approach – To perform the quantitative analysis a unique data sample was built out of acquisitions performed in the 5th and 6th merger waves with an only single purpose – strategic growth.

    Their performance was first analyzed using the method of market-based event study. In addition, the impact of several non-accounting determinants identified through a thorough literature review was tested using univariate/multivariate regression analysis.

    Findings – The new findings of the study state that strategic acquisitions for growth created more value for acquiring companies if they were completed internationally and involved an acquisition of a middle-sized company. Moreover, the acquisition of targets in the less related industries (2-SIC) led to stronger performance of acquirers, especially in the international settings.

    Research limitations/implications – The study suggests additional directions for future research. The future analysis can investigate the post-merger acquisition performance of strategic acquirers and can focus on additional financial (accounting) determinants in the evaluation of performance. This perspective can not only address the limitations imposed by the assumption of efficient capital markets but also provide additional insights.

    Practical implications –The results of current study have important implications for executives performing M&A for growth. They show that the market reaction to M&A announcement can be at least partially anticipated and help managers to plan their strategic moves based on a defined set of variables.

    Social implications – The study contributes to the sustainable, value-creating growth dynamics and encourages Executives to “lead for value.” Originality/value – (1) In contrast to the existing studies that do not differentiate between the transaction rationale in their analysis, this paper focuses explicitly only on those acquisitions that have strategic growth as their primary objective and responses therefore, to the problem stated by Halpern (1983). This approach helps to mitigate the distortion of results and make a reliable assessment of the strategic move. (2) The results of quantitative analysis also outline that acquisition of mid-sized targets and larger degree of diversification (2-SIC, international focus) code were associated with higher value creation.