Consolidation within the Australian real estate investment trust sector: an evaluation of the impact on unitholder returns

Mergers and acquisitions within the Australian‐real estate investment trusts (A‐REITs) sector have become a noticeable trend in the last decade. Utilising event study methodology, 36 successful A‐REIT mergers and acquisitions between January 1995 and December 2008 were examined. Both target and bidding shareholders experience positive excess returns of 4.27% and 0.54% respectively over the 41 day event window [−20, +20]. Analysis indicates that the cumulative abnormal returns (CARs) for bidding firms are considerably greater than previous research suggests. This study finds higher bidder CARs when scrip or a combination of scrip and cash is used to finance the acquisition. We also find that the relative size or the size of the acquirer have a positive and significant impact on the excess returns of bidding A‐REITs. This suggests that the synergistic benefits from the acquisition are a result of economies of scale and increased market power. There is also some evidence that the relative size and method of payment influence the CARs of target firms during the event window.