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The Performance of the European Market for Corporate Control: Evidence from the 5th Takeover Wave

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  • Martynova, M.
  • Renneboog, L.D.R.

    (Tilburg University, Center for Economic Research)

Abstract

For the 5th takeover wave, European M&As were expected to create significant takeover value: the announcement reactions were strongly positive for target shareholders (more than 35%) and the bidding shareholders also expected to gain a small though significant increase in market value of 0.5%.While, most of the expected takeover synergies are captured by the target firm shareholders, The combined value creation is significantly positive.However, the expected value strongly depends on the wave pattern, with optimistic expectations at the climax of the wave and a more pessimistic outlook at the decline.We establish that the characteristics of the target and bidding firms and of the bid itself have a significant impact on takeover returns.While some of our results have been documented for other markets of corporate control (e.g.US), a comparison of the UK and Continental European M&A markets reveals that the corporate environment is an important factor affecting the market reaction to takeovers: (i) In case a UK firm is taken over, the abnormal returns exceed those in bids involving a Continental European target.(ii) The presence of a large shareholder in the bidding firm has a significantly positive effect on the takeover returns in the UK and a negative one in Continental Europe.(iii) Weak investor protection and low disclosure environment in Continental Europe enable bidding firms to invent takeover strategies that allow them to act opportunistically towards target firm's incumbent shareholders; more specifically, partial acquisitions and acquisitions with undisclosed terms of transaction.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2006-118.

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Date of creation: 2006
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Handle: RePEc:dgr:kubcen:2006118

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Related research

Keywords: takeovers; mergers and acquisitions; diversification; hostile takeover; means of payment; cross-border acquisitions; private target; partial acquisitions;

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References

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Cited by:
  1. Olivier Bertrand & Marie-Ann Betschinger, 2011. "Performance of domestic and cross-border acquisitions: empirical evidence from Russian acquirers," Working Papers 129, European Bank for Reconstruction and Development, Office of the Chief Economist.
  2. Renneboog, L.D.R. & Zhao, Y., 2013. "Director Networks and Takeovers," Discussion Paper 2013-056, Tilburg University, Center for Economic Research.
  3. Petr VALOUCH & Jaroslav SEDLÁCEK & Alois KONECNÝ, 2012. "Analysis of the Behavior Mergermarket in the Conditions the Financial Crisis," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 37-44.

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