This thesis examines the impact of mergers and acquisitions on the firm value of the acquirer in the Finnish construction industry. In this study, firm value is measured by the price development of the publicly traded stock of the acquirer. The sample data includes events occurring during 2001 to 2019 and is limited to Finnish publicly listed and traded construction companies. Stock market data consists of individual stock price data collected from the Helsinki Stock Exchange and M&A data collected from ThomsonReuters. According to previous research in this field of mergers and acquisitions, it is found that most transactions tend to destroy firm value in contrary to their preliminary purpose. Previous research has mainly focused on the construction industries of the United Kingdom and United States. There has been little research in value creation of mergers and acquisitions in the Finnish construction industry or other industries.
The empirical part of the research is conducted by using the event study methodology which is an appro- priate method for examining the effects of mergers and acquisitions. The value effect of the event is meas- ured by the abnormal returns and cumulative abnormal returns of the acquirer’s stock. The chosen bench- mark is the OMX Helsinki index. The chosen event windows for the examination are [-20, 20], [-10, 10], [-5, 5] and [-1, 1]. Furthermore, a t-test is conducted to test the statistical significance of the empirical results. The first hypothesis of this thesis proposes that mergers and acquisitions have a negative impact on the firm value of the acquirer in the Finnish construction industry. The second hypothesis suggests that vertical mergers create more value for the acquirer measured by abnormal returns than horizontal mergers do.
The study examines the first hypothesis by examining the cumulative abnormal returns at the end of each event window. Transactions are considered successful in case they generate positive cumulative abnormal returns at the end of each event window. The results suggest that in short-term mergers and acquisitions in the Finnish construction industry tend to generate negative or extremely moderate positive cumulative ab- normal returns and vertical M&A’s do generate not only superior but also positive cumulative abnormal returns in comparison to horizontal transactions, however the t-tests show statistical insignificance
