Stock Market Reactions to Vertical and Horizontal M&A Deals : An Event Study of U.S. Acquirers and European Targets

Sammanfattning

This study examines whether financial markets differentiate between vertical and horizontal M&A structures in cross-border transactions involving publicly listed U.S. acquirers and European targets during 2020-2025. Prior research shows that M&A announcements returns vary across deal characteristics and institutional settings, but direct evidence on vertical-horizontal differences in a U.S.-Europe context remains limited. Drawing on the semi-strong form of Efficient Market Hypothesis and signaling theory, the study treats M&A structures as an observable deal characteristic that may inform investor assessments under information asymmetry. Using an event-study methodology, cumulative abnormal returns (CARs) are calculated for 112 completed large transactions across the event windows [-1, +1], [-2, +2], and [-5, +5]. Statistical significance is assessed using the BMP test and a two-sample Wilcoxon rank-sum test while cross sectional OLS regressions with heteroscedasticity-robust standard errors examine whether the vertical-horizontal difference remains after accounting for payment method, deal size, and year effects. The full sample shows negative and statistically significant average CARs across all event windows, mainly driven by horizontal deals. In contrast, vertical deals display positive average CARs, and the regressions results show a significant vertical premium across all specifications, corresponding to approximately 3.5 to 6.6 percentage points higher CAR depending on the event window. The findings suggest that M&A structure carries information that is relevant for investor valuation in this sample, although the results should be interpreted as context specific due to the relatively small and uneven sample, manual classification and focus on large, completed transactions.