Determinants of M&A effectiveness in acquisitions of EU companies

Abstract

Ilya Markovich Partyin - National Research University "Higher School of Economics."

Email: ipartin@hse.ru

Marina Vladimirovna Maslennikova - Public Joint Stock Company "Sberbank of Russia".

Email: maslennikovamv@gmail.com

M&A deals have always been the drivers of international business development. Growth of international M&A deals volume puts the scrutinized issue on the front burner. Under this article the key effectiveness determinants of international M&A deals with the participation of EU countries are analyzed on the data period from 2006 to 2014, excluding financial crisis.For international M&A deals research the following determinants are chosen on the basis of theoretical background: method of payment, friendliness or hostility of merger, belonging to the same industry, public or private status of the company, language differences, amount of M&A deals in the industry in the past year and financial leverage of the acquiring company. Method of CAR (Cumulated abnormal return) in the short-run period allows finding puzzling interconnections between dependent variable and the determinants of effectiveness. Different event-windows give the opportunity to analyze differences in CAR-values in 15 days before event, in the time of event and 15 days after event.Novelty of the paper lies in the division on the sample in clusters. Target-companies are all EU-residents on the moment of deal, but acquiring companies are divided into 3 groups by the country of residence: developed markets of USA and Canada, developing BRICS countries and developed countries of EU. Developed countries were graded to indicate advantages of European-zone residence.Whole sample analysis shows that significant factors are payment method and belonging to the same industry. Significance of dummy-variable «cluster» determines partial group analysis.International M&A deals effectiveness with USA and Canada is strongly influenced by method of payment – stocks and debt instruments increase CAR-value of the acquiring company. Belonging to the same industry, private status of the target-company and the same language positively influence M&A effectiveness.Belonging to the same industry and financial leverage of the acquiring-companies positively affect CAR in deals with developing markets of BRICS countries. The strongest negative effect is made by language differences.Analysis of EU acquiring companies shows the significance of the single variable – method of payment in all event – windows. As a result, payment with stocks increases CAR-value for the acquiring company in the short-run period.