Consolidation within the Australian real estate investment trust sector : an evaluation of the impact on unitholder returns

Abstract

Mergers and acquisitions within the Australian-real estate investment trusts (A-REITs) sector have become a noticeable trend in the last decade. Utilisingevent study methodology, 36 successful A-REIT mergers and acquisitionsbetween January 1995 and December 2008 were examined. Both target andbidding shareholders experience positive excess returns of 4.27% and 0.54%respectively over the 41 day event window [&minus;20, +20]. Analysis indicates that thecumulative abnormal returns (CARs) for bidding firms are considerably greaterthan previous research suggests. This study finds higher bidder CARs when scripor a combination of scrip and cash is used to finance the acquisition. We also findthat the relative size or the size of the acquirer have a positive and significantimpact on the excess returns of bidding A-REITs. This suggests that thesynergistic benefits from the acquisition are a result of economies of scale andincreased market power. There is also some evidence that the relative size andmethod of payment influence the CARs of target firms during the event window.<br /