Value Creation in (Serial) Acquisitions - The Nordic Evidence

Sammanfattning

Evidence of value creation for acquiring companies is revealed by a Nordic sample of acquisitions. The sample of 171 acquisitions, involving 130 acquirers, allows for investigating the performance of companies making several acquisitions. Such serial acquirers also generally create value, but to a lower extent and with a negative trend for each additional acquisition. It is found acquirers gain an average abnormal return of 3.25%, 2.75% and 3.09% in event windows t±1, t±2 and t±3 respectively upon deal announcement. Furthermore, we find single acquirers exhibit a larger average abnormal return than serial acquirers, and correspondingly, we find that value creation tend to decrease with the deal sequence in a logarithmic pattern. By discarding the theory of diminishing returns as an explanation, we instead reveal possible agency problems in the Nordics. Conversely, we reject the organizational learning hypothesis and capitalization hypothesis. Our study suggests that acquisitions can be fruitful for shareholders of bidding firms, yet merely so with the restriction of a single or few deals. The implications of our study is that shareholders in this region can benefit greatly from enhanced corporate governance.