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Value creation and division of gains in horizontal acquisitions in Europe: the role of industry conditions

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In this article, we empirically investigate the industry determinants of value creation through Mergers and Acquisitions (M&A) and the division of M&A gains for a sample of horizontal acquisitions in Europe during the period 1997–2008. We calculate the combined abnormal return around deal announcement to proxy for M&A value creation. Our results show that industry sales concentration and the ratio of the combined target and bidder size relative to the minimum efficient scale in the corresponding industry are significantly negatively associated with M&A value creation. The relation between industry sales growth and M&A gains is U-shaped. The extent of foreign competition within the industry, industry technological intensity and industry deregulation bear no significant association with M&A wealth effects, however. Finally, the data reveal that the division of M&A gains between target and bidder investors is determined by firm and deal characteristics rather than by industry conditions.

Keywords: G34; L29; M&A; event study; industry characteristics; value creation

Document Type: Research Article


Affiliations: 1: Department of Economics,Katholieke Universiteit Leuven, Naamsestraat 69,3000 Leuven, Belgium 2: Vlerick Leuven Gent Management School, Reep 19000 Ghent, Belgium

Publication date: May 1, 2013

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