M&A on Scandinavian market : evidence of factors for shareholder value creation from acquirer's perspective

Abstract

The purpose of this study is comprehensive analysis of drivers of M&A performance by bidders executing acquisitions in Nordic region. Considering mixed results on acquiring companies’ value creation for shareholders in such transactions, it was assumed that mergers may create value for certain types of deals. Despite having insignificant mean abnormal returns for all groups of M&A transactions, some results appeared to show contrary to previous empirical studies’ findings. With this respect particular attention was paid to bidders-growth firms which showed positive net gains comparing to value firms with negative net gains. Further regression results for all data sample showed: (a) that corporate governance as well as free cash flow issues are not drivers of post-acquisition performance of combined entity in deals on Scandinavian market what can be evidence of strong corporate control in local companies; (b) future growth opportunities is crucial determinant for value creation in M&A for a bidder. It motivated us to analyze growth and value acquiring firms separately. Results showed that both types of firms have the same drivers of abnormal returns but with inverse effect on value creation. Investors in Nordic acquirers appreciate stocks of growth firm which has many growth opportunities and acquires target in the same industry while react in opposite way for value firm with the same characteristics and in the same type of M&A. Limitations of data motivated us to give recommendations on further research on the topic.