IDEAS home Printed from https://ideas.repec.org/p/tiu/tiucen/531d24e9-4f1e-4df3-80db-d6d0b092d858.html
   My bibliography  Save this paper

Mergers and Acquisitions in Europe

Author

Listed:
  • Martynova, M.

    (Tilburg University, Center For Economic Research)

  • Renneboog, L.D.R.

    (Tilburg University, Center For Economic Research)

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.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was bor
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Martynova, M. & Renneboog, L.D.R., 2006. "Mergers and Acquisitions in Europe," Discussion Paper 2006-6, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:531d24e9-4f1e-4df3-80db-d6d0b092d858
    as

    Download full text from publisher

    File URL: https://pure.uvt.nl/ws/portalfiles/portal/777056/6.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Morck, Randall & Shleifer, Andrei & Vishny, Robert W, 1990. "Do Managerial Objectives Drive Bad Acquisitions?," Journal of Finance, American Finance Association, vol. 45(1), pages 31-48, March.
    2. Dennis, Debra K. & McConnell, John J., 1986. "Corporate mergers and security returns," Journal of Financial Economics, Elsevier, vol. 16(2), pages 143-187, June.
    3. Sara B. Moeller & Frederik P. Schlingemann & René M. Stulz, 2005. "Wealth Destruction on a Massive Scale? A Study of Acquiring‐Firm Returns in the Recent Merger Wave," Journal of Finance, American Finance Association, vol. 60(2), pages 757-782, April.
    4. Marco Becht & Colin Mayer, 2002. "Corporate control in Europe," Revue d'économie politique, Dalloz, vol. 112(4), pages 471-498.
    5. Amar Bhide, 1989. "The Causes And Consequences Of Hostile Takeovers," Journal of Applied Corporate Finance, Morgan Stanley, vol. 2(2), pages 36-59, June.
    6. Franks, Julian & Mayer, Colin, 1996. "Hostile takeovers and the correction of managerial failure," Journal of Financial Economics, Elsevier, vol. 40(1), pages 163-181, January.
    7. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    8. Kenneth A. Froot & Jeremy C. Stein, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1191-1217.
    9. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    10. Mitchell, Mark L & Lehn, Kenneth, 1990. "Do Bad Bidders Become Good Targets?," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 372-398, April.
    11. Marc Goergen & Luc Renneboog, 2004. "Shareholder Wealth Effects of European Domestic and Cross‐border Takeover Bids," European Financial Management, European Financial Management Association, vol. 10(1), pages 9-45, March.
    12. Martynova, M. & Renneboog, L.D.R., 2005. "Takeover Waves : Triggers, Performance and Motives," Discussion Paper 2005-029, Tilburg University, Tilburg Law and Economic Center.
    13. Blume, Marshall E, 1979. "Betas and Their Regression Tendencies: Some Further Evidence," Journal of Finance, American Finance Association, vol. 34(1), pages 265-267, March.
    14. Raghuram Rajan & Henri Servaes & Luigi Zingales, 2000. "The Cost of Diversity: The Diversification Discount and Inefficient Investment," Journal of Finance, American Finance Association, vol. 55(1), pages 35-80, February.
    15. Campbell, Cynthia J & Wasley, Charles E, 1996. "Measuring Abnormal Daily Trading Volume for Samples of NYSE/ASE and NASDAQ Securities Using Parametric and Nonparametric Test Statistics," Review of Quantitative Finance and Accounting, Springer, vol. 6(3), pages 309-326, May.
    16. Scholes, Myron S & Wolfson, Mark A, 1990. "The Effects of Changes in Tax Laws on Corporate Reorganization Activity," The Journal of Business, University of Chicago Press, vol. 63(1), pages 141-164, January.
    17. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
    18. Agrawal, Anup & Mandelker, Gershon N, 1987. "Managerial Incentives and Corporate Investment and Financing Decision s," Journal of Finance, American Finance Association, vol. 42(4), pages 823-837, September.
    19. Barca, Fabrizio & Becht, Marco (ed.), 2001. "The Control of Corporate Europe," OUP Catalogue, Oxford University Press, number 9780199247424.
    20. Franks, Julian R. & Harris, Robert S., 1989. "Shareholder wealth effects of corporate takeovers : The U.K. experience 1955-1985," Journal of Financial Economics, Elsevier, vol. 23(2), pages 225-249, August.
    21. Moeller, Sara B. & Schlingemann, Frederik P., 2005. "Global diversification and bidder gains: A comparison between cross-border and domestic acquisitions," Journal of Banking & Finance, Elsevier, vol. 29(3), pages 533-564, March.
    22. Schwert, G. William, 1996. "Markup pricing in mergers and acquisitions," Journal of Financial Economics, Elsevier, vol. 41(2), pages 153-192, June.
    23. Marc Goergen, 2005. "Corporate Governance Convergence: Evidence From Takeover Regulation Reforms in Europe," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 21(2), pages 243-268, Summer.
    24. Lang, Larry H. P. & Stulz, ReneM. & Walkling, Ralph A., 1989. "Managerial performance, Tobin's Q, and the gains from successful tender offers," Journal of Financial Economics, Elsevier, vol. 24(1), pages 137-154, September.
    25. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
    26. Dimson, Elroy, 1979. "Risk measurement when shares are subject to infrequent trading," Journal of Financial Economics, Elsevier, vol. 7(2), pages 197-226, June.
    27. Marco Becht & Fabrizio Barca, 2001. "The control of corporate Europe," ULB Institutional Repository 2013/13302, ULB -- Universite Libre de Bruxelles.
    28. David S. Scharfstein & Jeremy C. Stein, 2000. "The Dark Side of Internal Capital Markets: Divisional Rent‐Seeking and Inefficient Investment," Journal of Finance, American Finance Association, vol. 55(6), pages 2537-2564, December.
    29. Morck, Randall & Shleifer, Andrei & Vishny, Robert W, 1989. "Alternative Mechanisms for Corporate Control," American Economic Review, American Economic Association, vol. 79(4), pages 842-852, September.
    30. Asquith, Paul & Bruner, Robert F. & Mullins, David Jr., 1983. "The gains to bidding firms from merger," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 121-139, April.
    31. Ravenscraft, David J. & Scherer, F. M., 1989. "The profitability of mergers," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 101-116, March.
    32. Rossi, Stefano & Volpin, Paolo F., 2004. "Cross-country determinants of mergers and acquisitions," Journal of Financial Economics, Elsevier, vol. 74(2), pages 277-304, November.
    33. Bradley, Michael & Desai, Anand & Kim, E. Han, 1988. "Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms," Journal of Financial Economics, Elsevier, vol. 21(1), pages 3-40, May.
    34. A. Sinan Cebenoyan & George J. Papaioannou & Nickolaos G. Travlos, 1992. "Foreign Takeover Activity in the U.S. and Wealth Effects for Target Firm Shareholders," Financial Management, Financial Management Association, vol. 21(3), Fall.
    35. Franks, Julian & Harris, Robert & Titman, Sheridan, 1991. "The postmerger share-price performance of acquiring firms," Journal of Financial Economics, Elsevier, vol. 29(1), pages 81-96, March.
    36. Lang, Larry H. P. & Stulz, ReneM. & Walkling, Ralph A., 1991. "A test of the free cash flow hypothesis*1: The case of bidder returns," Journal of Financial Economics, Elsevier, vol. 29(2), pages 315-335, October.
    37. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
    38. Servaes, Henri, 1991. "Tobin's Q and the Gains from Takeovers," Journal of Finance, American Finance Association, vol. 46(1), pages 409-419, March.
    39. Lewellen, Wilbur G, 1971. "A Pure Financial Rationale for the Conglomerate Merger," Journal of Finance, American Finance Association, vol. 26(2), pages 521-537, May.
    40. Smith, Richard L & Kim, Joo-Hyun, 1994. "The Combined Effects of Free Cash Flow and Financial Slack on Bidder and Target Stock Returns," The Journal of Business, University of Chicago Press, vol. 67(2), pages 281-310, April.
    41. Arturo Bris & Christos Cabolis, 2008. "The Value of Investor Protection: Firm Evidence from Cross-Border Mergers," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 605-648, April.
    42. Kang, Jun-Koo, 1993. "The international market for corporate control *1: Mergers and acquisitions of U.S. firms by Japanese firms," Journal of Financial Economics, Elsevier, vol. 34(3), pages 345-371, December.
    43. Higgins, Robert C & Schall, Lawrence D, 1975. "Corporate Bankruptcy and Conglomerate Merger," Journal of Finance, American Finance Association, vol. 30(1), pages 93-113, March.
    44. Mulherin, J. Harold & Boone, Audra L., 2000. "Comparing acquisitions and divestitures," Journal of Corporate Finance, Elsevier, vol. 6(2), pages 117-139, July.
    45. Alan Gregory, 1997. "An Examination of the Long Run Performance of UK Acquiring Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(7‐8), pages 971-1002, September.
    46. Hasbrouck, Joel, 1985. "The characteristics of takeover targets and other measures," Journal of Banking & Finance, Elsevier, vol. 9(3), pages 351-362, September.
    47. Shelton, Lois M., 2000. "Merger market dynamics: insights into the behavior of target and bidder firms," Journal of Economic Behavior & Organization, Elsevier, vol. 41(4), pages 363-383, April.
    48. Hyun-Han Shin & René M. Stulz, 1998. "Are Internal capital Markets Efficient?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 531-552.
    49. G. William Schwert, 2000. "Hostility in Takeovers: In the Eyes of the Beholder?," Journal of Finance, American Finance Association, vol. 55(6), pages 2599-2640, December.
    50. Randall Morck & Andrei Shleifer & Robert W. Vishny, 1988. "Characteristics of Targets of Hostile and Friendly Takeovers," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 101-136, National Bureau of Economic Research, Inc.
    51. Corrado, Charles J., 1989. "A nonparametric test for abnormal security-price performance in event studies," Journal of Financial Economics, Elsevier, vol. 23(2), pages 385-395, August.
    52. Martin, Kenneth J & McConnell, John J, 1991. "Corporate Performance, Corporate Takeovers, and Management Turnover," Journal of Finance, American Finance Association, vol. 46(2), pages 671-687, June.
    53. Robert L. Conn & Andy Cosh & Paul M. Guest & Alan Hughes, 2005. "The Impact on UK Acquirers of Domestic, Cross‐border, Public and Private Acquisitions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(5‐6), pages 815-870, June.
    54. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
    55. Moeller, Sara B. & Schlingemann, Frederik P. & Stulz, Rene M., 2004. "Firm size and the gains from acquisitions," Journal of Financial Economics, Elsevier, vol. 73(2), pages 201-228, August.
    56. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    57. Dimson, E & Marsh, P R, 1983. "The Stability of UK Risk Measures and the Problem of Thin Trading," Journal of Finance, American Finance Association, vol. 38(3), pages 753-783, June.
    58. R. Glenn Hubbard & Darius Palia, 1999. "A Reexamination of the Conglomerate Merger Wave in the 1960s: An Internal Capital Markets View," Journal of Finance, American Finance Association, vol. 54(3), pages 1131-1152, June.
    59. Kaplan, Steven N & Weisbach, Michael S, 1992. "The Success of Acquisitions: Evidence from Divestitures," Journal of Finance, American Finance Association, vol. 47(1), pages 107-138, March.
    60. Saeyoung Chang, 1998. "Takeovers of Privately Held Targets, Methods of Payment, and Bidder Returns," Journal of Finance, American Finance Association, vol. 53(2), pages 773-784, April.
    61. Alan Gregory, 1997. "An Examination of the Long Run Performance of UK Acquiring Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(7&8), pages 971-1002.
    62. Henri Servaes & Marc Zenner, 1994. "Taxes and the Return to Foreign Acquisitions in the United States," Financial Management, Financial Management Association, vol. 23(4), Winter.
    63. Robert L. Conn & Andy Cosh & Paul M. Guest & Alan Hughes, 2005. "The Impact on UK Acquirers of Domestic, Cross-border, Public and Private Acquisitions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(5-6), pages 815-870.
    64. McCahery, Joseph A. & Moerland, Piet & Raaijmakers, Theo & Renneboog, Luc (ed.), 2002. "Corporate Governance Regimes: Convergence and Diversity," OUP Catalogue, Oxford University Press, number 9780199247875.
    65. Jo Danbolt, 2004. "Target Company Cross‐border Effects in Acquisitions into the UK," European Financial Management, European Financial Management Association, vol. 10(1), pages 83-108, March.
    66. Amar Bhide, 1990. "Reversing Corporate Diversification," Journal of Applied Corporate Finance, Morgan Stanley, vol. 3(2), pages 70-81, June.
    67. Jarrell, Gregg A & Brickley, James A & Netter, Jeffry M, 1988. "The Market for Corporate Control: The Empirical Evidence Since 1980," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 49-68, Winter.
    68. Palepu, Krishna G., 1986. "Predicting takeover targets : A methodological and empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 8(1), pages 3-35, March.
    69. Healy, Paul M. & Palepu, Krishna G. & Ruback, Richard S., 1992. "Does corporate performance improve after mergers?," Journal of Financial Economics, Elsevier, vol. 31(2), pages 135-175, April.
    70. Raghavendra Rau, P. & Vermaelen, Theo, 1998. "Glamour, value and the post-acquisition performance of acquiring firms," Journal of Financial Economics, Elsevier, vol. 49(2), pages 223-253, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martynova, M., 2006. "The market for corporate control and corporate governance regulation in Europe," Other publications TiSEM 8651e281-4914-41f2-ac14-1, Tilburg University, School of Economics and Management.
    2. Martynova, M. & Renneboog, L.D.R., 2006. "The Performance of the European Market for Corporate Control : Evidence from the 5th Takeover Wave," Discussion Paper 2006-118, Tilburg University, Center for Economic Research.
    3. Martynova, Marina & Renneboog, Luc, 2008. "A century of corporate takeovers: What have we learned and where do we stand?," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2148-2177, October.
    4. Martynova, M. & Renneboog, L.D.R., 2005. "Takeover Waves : Triggers, Performance and Motives," Discussion Paper 2005-107, Tilburg University, Center for Economic Research.
    5. Andrey Golubov & Dimitris Petmezas & Nickolaos G. Travlos, 2013. "Empirical mergers and acquisitions research: a review of methods, evidence and managerial implications," Chapters, in: Adrian R. Bell & Chris Brooks & Marcel Prokopczuk (ed.), Handbook of Research Methods and Applications in Empirical Finance, chapter 12, pages 287-313, Edward Elgar Publishing.
    6. Mateev, Miroslav & Andonov, Kristiyan, 2016. "Do cross-border and domestic bidding firms perform differently? New evidence from continental Europe and the UK," Research in International Business and Finance, Elsevier, vol. 37(C), pages 327-349.
    7. Marc Goergen & Luc Renneboog, 2004. "Shareholder Wealth Effects of European Domestic and Cross‐border Takeover Bids," European Financial Management, European Financial Management Association, vol. 10(1), pages 9-45, March.
    8. McCahery, J.A. & Renneboog, L.D.R., 2003. "The Economics of the Proposed European Takeover Directive," Other publications TiSEM b16fdfd0-9e4e-44bb-b20f-f, Tilburg University, School of Economics and Management.
    9. Kanungo, Rama Prasad, 2021. "Uncertainty of M&As under asymmetric estimation," Journal of Business Research, Elsevier, vol. 122(C), pages 774-793.
    10. Marina Martynova & Luc Renneboog, 2011. "The Performance of the European Market for Corporate Control: Evidence from the Fifth Takeover Wave," European Financial Management, European Financial Management Association, vol. 17(2), pages 208-259, March.
    11. Feito-Ruiz, Isabel & Menéndez-Requejo, Susana, 2011. "Cross-border Mergers and Acquisitions in different legal environments," International Review of Law and Economics, Elsevier, vol. 31(3), pages 169-187, September.
    12. Renneboog, Luc & Vansteenkiste, Cara, 2019. "Failure and success in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 650-699.
    13. Mateev, Miroslav, 2017. "Is the M&A announcement effect different across Europe? More evidences from continental Europe and the UK," Research in International Business and Finance, Elsevier, vol. 40(C), pages 190-216.
    14. Marina Martynova & Luc Renneboog, 2010. "Spillover of Corporate Governance Standards in Cross-Border Mergers and Acquisition," Chapters, in: Alessio M. Pacces (ed.), The Law and Economics of Corporate Governance, chapter 3, Edward Elgar Publishing.
    15. Szilagyi, P.G., 2007. "Corporate governance and the agency costs of debt and outside equity," Other publications TiSEM 9520d40a-224f-43a8-9bf9-b, Tilburg University, School of Economics and Management.
    16. Antonios Antoniou & Dimitris Petmezas & Huainan Zhao, 2007. "Bidder Gains and Losses of Firms Involved in Many Acquisitions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(7‐8), pages 1221-1244, September.
    17. Bhagat, Sanjai & Dong, Ming & Hirshleifer, David & Noah, Robert, 2005. "Do tender offers create value? New methods and evidence," Journal of Financial Economics, Elsevier, vol. 76(1), pages 3-60, April.
    18. Bhabra, Harjeet S. & Huang, Jiayin, 2013. "An empirical investigation of mergers and acquisitions by Chinese listed companies, 1997–2007," Journal of Multinational Financial Management, Elsevier, vol. 23(3), pages 186-207.
    19. Mateev, Miroslav & Andonov, Kristiyan, 2018. "Do European bidders pay more in cross-border than in domestic acquisitions? New evidence from Continental Europe and the UK," Research in International Business and Finance, Elsevier, vol. 45(C), pages 529-556.
    20. Martynova, Marina & Renneboog, Luc, 2009. "What determines the financing decision in corporate takeovers: Cost of capital, agency problems, or the means of payment?," Journal of Corporate Finance, Elsevier, vol. 15(3), pages 290-315, June.

    More about this item

    Keywords

    takeovers; mergers and acquisitions; diversification; takeover waves; means of payment;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tiu:tiucen:531d24e9-4f1e-4df3-80db-d6d0b092d858. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Richard Broekman (email available below). General contact details of provider: http://center.uvt.nl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.