Value Creation in M&A transactions

As many writers, analyst or people related to financesay, Mergers & Acquisitions transactions are most ofthe times not profitable or they do not “create value”, making the acquirer’s shareholders lose money. Even it is estimated that “around 50% of mergers don’t achieve their business objectives [...] according to several studies conducted over the past four decades” (Kumar, 2009). This research paper tries, in first place, to understand and explain a bit more the process and the facts of M&A transactions, taking a deeper look at value creation, what it is and how it can be measured. So later, it will try, by analysing some past transactions in Europe, explain or conclude which factors are more important to succeed in this type of activities, as well as understand how this world is nowadays (volume of transactions, size of them, countries and industries of the companies, etc.)Outgoin

Reducing structural dominance and entry barriers in Russian industry

Many industrial firms in Russia have undergone changes in ownership, but relatively few have been competitively restructured. Using survey and other data, the author suggests that much of Russian industry is immune from robust competition because of heavy vertical integration, geographic segmentation, and the concentration of buyers and sellers, in selected markets. Moreover, regulatory constraints protect incumbent firms from competition with new entrants, both domestic and foreign. The author sketches a reform agenda for Russia's post-privatization program, which emphasizes the restructuring of anti-competitive structures and the reduction of barriers to entry. The author's proposed reform agenda calls broadly for strengthening Russia's nascent rules-based framework for competition policy to reduce discretion, increase transparency, and improve accountability.Markets and Market Access,Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Small and Medium Size Enterprises,Environmental Economics&Policies,Economic Theory&Research,Private Participation in Infrastructure,Small Scale Enterprise,Microfinance

Stock Market Reaction to Mergers and Acquisitions Announcements in Emerging Markets. Evidence from Mergers and Acquisitions Firms Listed in Eastern Africa Securities Markets

Stock market reaction to mergers and acquisitions announcements is a topical issue in corporate finance. Consequently, the topic has received attention in equal measure; however, the bulk of these studies are skewed towards the developed financial markets. The foregoing evidence raises a fundamental question; is the empirical evidence exhibited in developed financial markets applicable in the emerging markets? Using data from listed firms in Eastern Africa securities market involved in mergers and acquisitions for the period 1996- 2015, we computed cumulative abnormal returns for different holding period. Parametric t test was used to test the significance of the abnormal returns. Our findings revealed that acquirer firm shareholders earned a significant positive cumulative abnormal return during the entire event window that is [-20, +20].  On the other hand, cumulative average abnormal return findings revealed that acquiring firms earned positive return immediately after the acquisition announcement. However, the positive performance was short lived, four days after M&A announcement returns declined sharply. Keywords: Mergers and acquisition, cumulative abnormal return and Cumulative average abnormal return

Understanding key issues of M&A activity in Russia: the case of oil & gas and banking industries

This study aims to analyse Russian oil & gas and banking industries from the point of view of M&A activity. In a form of case study, a brief history of M&A deals in both industries is presented and analysed in a context of Russian culture and economic environment. The study suggests that Russia is an extremely interesting and important example of a transitioning economy that could be useful for analysis of M&A activity in emerging markets. Research suggests that Russian economy through its short history has taken a path of strong consolidation and its key industries are now represented by few large players. History of M&A in Russia is full with hostile takeovers and scandals, while the level of foreign investments always remained low. Possible reasons for that could be found in Russia’s cultural and historical background, especially in the strength of informal institutions in the managerial practices. The study opens a discussion for further research on the topic

Mergers and acquisitions transactions strategies in diffusion - type financial systems in highly volatile global capital markets with nonlinearities

The M and A transactions represent a wide range of unique business optimization opportunities in the corporate transformation deals, which are usually characterized by the high level of total risk. The M and A transactions can be successfully implemented by taking to an account the size of investments, purchase price, direction of transaction, type of transaction, and using the modern comparable transactions analysis and the business valuation techniques in the diffusion type financial systems in the finances. We developed the MicroMA software program with the embedded optimized near-real-time artificial intelligence algorithm to create the winning virtuous M and A strategies, using the financial performance characteristics of the involved firms, and to estimate the probability of the M and A transaction completion success. We believe that the fluctuating dependence of M and A transactions number over the certain time period is quasi periodic. We think that there are many factors, which can generate the quasi periodic oscillations of the M and A transactions number in the time domain, for example: the stock market bubble effects. We performed the research of the nonlinearities in the M and A transactions number quasi-periodic oscillations in Matlab, including the ideal, linear, quadratic, and exponential dependences. We discovered that the average of a sum of random numbers in the M and A transactions time series represents a time series with the quasi periodic systematic oscillations, which can be finely approximated by the polynomial numbers. We think that, in the course of the M and A transaction implementation, the ability by the companies to absorb the newly acquired knowledge and to create the new innovative knowledge bases, is a key predeterminant of the M and A deal completion success as in Switzerland.Comment: 160 pages, 9 figures, 37 table

Foreign Ownership and Corporate Restructuring: Direct Investment by Emerging-Market Firms in the United States

This paper examines the recent upsurge in foreign direct investment by emerging-market firms into the United States. Traditionally, direct investment flowed from developed to developing countries, bringing with it superior technology, organizational capital, and access to international capital markets, yet increasingly there is a trend towards Òcapital flowing uphillÓ with emerging market investors acquiring a broad range of assets in developed countries. Using transaction-specific information and firm-level accounting data we evaluate the operating performance of publicly traded U.S. firms that have been acquired by firms from emerging markets over the period 1980-2007. Our empirical methodology uses a difference-in-differences approach combined with propensity score matching to create an appropriate control group of non-acquired firms. The results suggest that emerging country acquirers tend to choose U.S. targets that are larger in size (measured as sales, total assets and employment), relative to matched non-acquired U.S. firms before the acquisition year. In the years following the acquisition, sales and employment decline while profitability rises, suggesting significant restructuring of the target firms.foreign direct investment, capital flows, emerging markets, acquisitions, firm performance

Corporate Governance and Ownership Structure in the Transition: The Current State of Knowledge and Where to Go from Here

The purpose of the paper is to present the current state of knowledge on both theoretical models and empirical evidence of interrelations between emerging corporate governance mechanisms and ownership structure of privatized enterprises in post-Communist countries. Section 2 contains extensive literature review on the subject. In Section 3, the results of the research coordinated by CASE on post-privatization changes in ownership structure of Polish, Czech and Slovenian enterprises are presented. In Section 4, the Authors present conclusions and a few suggestions for policy makers.corporate governance, privatization, enterprise restructuring, transition economy

Policy Liberalization and FDI Growth, 1982 to 2006

Over the last three decades the global economy has expanded in a remarkable fashion. While nominal world GDP has increased four times, world bilateral trade flows have grown more than six-fold, and the stock of foreign direct investment (FDI) has grown by roughly 20 times since 1980. The sources of global trade and investment growth are well known—general economic expansion, policy liberalization, and better communications and technology—but the impact of each source is unclear. In this paper we attempt to uncover the contribution of policy liberalization to the rising ratios of US inward and outward FDI stocks to GDP over the last three decades. The role of policy liberalization in fostering FDI expansion since the 1980s is murky. Policies related to FDI have undoubtedly been liberalized since the 1980s, but the changes are not easily quantified, making an assessment of their impact on FDI difficult. To get around this obstacle, we rely on stylized facts about US inward and outward FDI stocks and an unorthodox calculation method to approximate the role of policy liberalization on FDI growth.Foreign direct investment, Policy liberalization, International economic integration