European Strategic M&As: an Event Study Analysis

Foreword M&A is a complex phenomenon that still captures the research attention of a wide range of management disciplines encompassing the strategic, financial, operational, psychological and behavioral features of this challenging decision. According to Mckinsey, in 2015 acquirers spent $4.9 trillion on mergers and acquisitions across the globe, that is, the highest amount ever in the history, surpassing even the previous record set in 2007, before the financial crisis. Moving from a global recession environment, deal-making has experienced a pronounced qualitative improvement in terms of value accrued to shareholders of both buyers and targets companies jointly. This is testified by the deal value added metric , scoring in last years consistently higher than the 15-year average. Even more surprisingly, despite empirical financial research has frequently claimed that all significant gains of M&A are absorbed by the shareholders of the target company, acquirers’ returns remained slightly positive since the third quarter of 2009. Given the many external and internal variables affecting these complex transactions, many explanations can be put forward and justify, jointly more than separately, this improvement. For instance, stock markets may have rewarded companies for investing their dry powder or perhaps quantitative easing mechanism may have encouraged share prices. Of paramount importance appears that, after financial crisis, acquirers exhibited a more selective approach to perform M&A activity. Looking at the last downturn, the raise materialized in professionalized corporate M&A seems to reject a simplistic cyclicity of the phenomenon. The evidence coming from this broad scenario is narrowed by introducing original elements of analysis still not deeply considered by the literature, such as the focus on strategic industrial M&A within Europe borders, the immediate post-great recession period, the enhanced quality of acquirers in realizing synergies and a strategic opportunities 3D matrix for acquirers. From this context, the present investigation arises and evolves adopting the event study methodology as analytic tool to measure abnormal changes in share prices of publicly traded companies around the official announcement. Since its origins in the papers by Ball and Brown (1968) and Fama, Fisher, Jensen and Roll (1969), this methodology is rooted in efficient market hypothesis, namely, stock prices adjust very rapidly to new information. According to such contextualization, by M&A successful completion any expected value changes should be incorporated into share prices because the time uncertainty would expire in that moment. Both the widespread of sophisticated statistical software and the introduction of the market model, developed after the popular capital asset pricing model (CAPM) of Sharpe (1964), contribute to reinforce the reputation of event study analysis, finally established by the landmark paper by Brown and Warner (1980): “Measuring security price performance”. Beyond demonstrating “that a rather simple methodology based on the market model performs well under a wide variety of conditions” the content of the paper reaches a depth and breadth that represent a constant point of reference for all the literature till today’s frontier of the research. The dissertation is organized as follows. Chapter 1 plays the critical role to pave the way of reviewing the methodology and explore advanced related topics. Chapter 2 presents with a concise and effective style the major issues involved in a “buy-side” assignment, combining a best-practice approach of professionals, interwoven and enriched by insightful contributions of researchers. Chapter 3 starts describing the analysis and the fundamental decisions surrounding it and ends with the empirical findings. Chapter 4 is completely devoted to conclusions.