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M&A in the Construction Industry -Wealth Effects of Diversification into Real Estate Life Cycle Related Services

Author

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  • Nico Rottke

    (EBS Universitat fur Wirtschaft und Recht i.Gr., Gustav-Stresemann-Ring 3, 65189 Wiesbaden, Germany)

  • Dirk Schiereck

    (Technische Universitat Darmstadt, Hochschulstr. 1, 64289 Darmstadt, Germany)

  • Stephan Pauser

    (EBS Universitat fur Wirtschaft und Recht i.Gr., Gustav-Stresemann-Ring 3, 65189 Wiesbaden, Germany)

Abstract

Since the late 1990s, the construction industry has undergone a change in business model, as contractors vertically expand their operations to other parts of the real estate life cycle. The question arises on whether construction companies have superior abilities as real estate service providers. We have examined the value implications of 106 large merger and acquisition (M&A) transactions in the construction industry worldwide from 1986 to 2006. We inquire if a vertical expansion of the construction value chain in the real estate life cycle through M&A leads to the creation of shareholder value. We find out that this is not the case. M&A success is mainly determined by industry-specific size effects and common agency conflicts.

Suggested Citation

  • Nico Rottke & Dirk Schiereck & Stephan Pauser, 2011. "M&A in the Construction Industry -Wealth Effects of Diversification into Real Estate Life Cycle Related Services," International Real Estate Review, Global Social Science Institute, vol. 14(3), pages 283-310.
    • Handle: RePEc:ire:issued:v:14:n:03:2011:p:283-310
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    More about this item

    Keywords

    Construction industry; Cross-border acquisitions; Bidder gains; Global diversification;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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