Bidder Returns & Operating Performance : A Study on Relatively Large Acquisitions by Nordic Public Firms

We analyze the bidder announcement returns and operating performance on relatively large acquisitions undertaken by Nordic public firms during the years 1998-2003. We find bidder announcement returns to have increased by a median 1.46%. Operating performance, on the other hand, has decreased by a median 2.13% compared to peers. We do not find any positive relation between the performance measures. Additionally we look at six determinants to test their relation and explanatory power on the performance measures. Although we find qualitative support for most of our hypotheses, we only find two determinants with statistical significance. Transactions undertaken by firms with relatively large cash holdings achieve higher bidder returns upon announcement. Transactions taking place in bull markets have seen operating improvements increase more than those pursued in bearish. In the absence of statistical significance on most variables, we conclude that general determinants are limited in explaining the outcome of acquisitions and suggest that the performance is rather affected by deal-specific characteristics.


1 Introduction
2 Theoretical and Empirical Discussion
2.1 Realizing Value through Acquisitions
2.2 Previous Research
2.3 Hypotheses
2.3.1 Performance Measures
2.3.2 Determinants
2.3.3 Relation between Performance Measures
2.4 Summary of Hypotheses
3 Methodology
3.1 Description of Performance Measures
3.2 Description of Determinants
3.3 Description of Regression Models
3.3.1 Determinants
3.3.2 Relation between Performance Measures
4 Sample and Data
4.1 Sources
4.2 Sample Construction
4.3 Descriptive Statistics
5 Results and Analysis
5.1 Performance Measures
5.2 Regression Analysis
5.2.1 Determinants
5.2.2 Relation between Performance Measures
5.3 Summary of Results
6 Conclusion
6.1 Summary of Findings
6.2 Critical Discussion
6.3 Suggestions for further research
Appendix: Previous Empirical Studies

Author: Alexander Hartman, Marcus Lund

Source: Stockholm School of Economics