M&A Success and Economic Cycles: A Survey of European Firms

Sammanfattning: There is limited research that investigates the relationship between M&A success and market valuation periods. Furthermore existing research deals primarily with the U.S. market. This paper explores whether acquisitions in Europe occurring during high market valuation periods are fundamentally different than those occurring during low market valuation periods. We find that acquisitions during high valuation periods yield significantly higher announcement returns that those that occurred during the low valuation periods. Furthermore, the high valuation firms yielded significantly higher long term returns than the low valuation firms. However, the combined sample of firms and the high, low and neutral portfolios all had significantly negative long term returns. We attribute the negative long term returns to the dynamics of the European market and the cross-border nature of a large portion of the acquisitions in our sample