COVID-19's Impact on the European M&A Environment: A study about acquirers' short-term performance

Sammanfattning: Purpose: The main purpose of this study is to examine how the short-term performance of European acquirers, following M&A announcements, has been affected by the COVID-19 pandemic. In addition, this study also aims to examine how diversifying M&As have been affected, and whether acquirers’ firm value demonstrated a positive relationship with CARs during the pandemic. Methodology: This study applies a quantitative approach using a deductive method. An event study methodology was used to obtain acquirers CARs. Thereafter, a regression analysis studied its relationship with the selected event variables of interest. Theoretical perspective: A literature review covering relevant financial concepts, combined with previous empirical studies analyzing acquirers performance in association with M&As, constituted the theoretical framework of this study. Empirical foundation: The sample consisted of 918 M&As announced between 2016-01-01 and 2020-12-31. All transactions solely involved European companies, where all acquiring firms were publicly traded. The empirical data was extracted from Zephyr and Datastream. Conclusion: M&As announced between 2016 and 2020 demonstrated significantly positive effects on acquiring firms shareholder wealth. Announcements made before COVID-19 yielded positive CARs, statistically significant at a 1%-level for both the short (3 days) and long (11days) event windows, at 0.586 percent and 1.459 percent respectively. On the contrary, announcements made during the pandemic demonstrated insignificantly negative returns. However, due to low statistical significance in the regression analysis, this study fails to properly demonstrate which factors contributed to this effect.