How does the takeover of a company in developed markets through a firm coming from emerging countries affect the share price of the acquirer in the short term in comparison to both inbound emerging markets as well as domestic takeovers and how does the impact of a diversification strategy differ from an industry focused strategy in terms of value creation for acquiring companies?

Abstract

The aim of this thesis is to examine the value impact on acquiring companies’ share prices caused by takeover announcements, differentiating between domestic, inbound and outbound emerging markets transactions as well as between industry diversifying and industry focused M&A. Additionally contextual factors shall be determined that drive the value creation patterns observed in the event study. The results obtained for a total sample of 1,434 transactions in a time period from January 2000 until January 2016 and an event window of 21 trading days (-10,+10) around the announcement day suggest that transactions with target and acquiring companies coming from emerging markets on average create the highest value with a CAAR of 2.41% in comparison to outbound and inbound M&A with CAARs of 1.32% and 1.26% respectively. Additionally, industry diversifying takeovers are equally superior to focused transactions in terms of value creation for both developed and emerging markets acquiring companies engaged in outbound and inbound M&A respectively. Finally, OLSregression results suggest that there is a positive correlation between acquiring firms’ shareholder value creation and relative deal size, non-public legal status of the target company as well as a combined payment method (cash and stock), whereas for the percentage of ownership acquired no statistically significant results are obtained.

Date of Award	16 Feb 2016
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Pramuan Bunkanwanwanicha (Supervisor)