ABNORMAL ACQUIRER RETURNS IN NORDIC TAKEOVER MARKET - TARGET SELECTION AND PAYMENT METHOD

Abstract

Nordic firms undertake acquisitions and mergers with a growing pace, reaching M&A activity levels comparable to US and continental Europe. However, earlier research on acquirer returns does not cover North European deals.

In this paper an overview of the Nordic takeover market is provided. Initial sample of 3,061 domestic and cross-border corporate takeovers taken place in years 2005 -2015 is analyzed to find the main characteristic of Nordic M&A market. Further, a sample of 203 deals is statistically analyzed to see if the phenomenon linked to US and Continent European M&A deals also stretch out to the North European financial market.

The purpose of the study is to shed light on how acquirer’s choice of payment method (all-cash, all-equity, or mixed deals) and the legal status of the target (public or private) affect the acquirer’s performance. This performance is measured with short term acquirer returns.

An event study is executed to measure the cumulative abnormal returns (CARs) following the merger announcement. Three different methods are used to carry out the event study to capture the true presence or absence of abnormal returns caused by the takeover transaction. These three methods are the market model, the mean adjusted return method and the market adjusted return method.

This study provides empirical evidence that M&A deals, on average, are a positive net present investment for the North European acquirers. Moreover, the target selection and the payment method of the deal are found to have statistically significant impact on acquirer performance.