Comparison of Value Creation through M&A in European Union

Abstract

Mergers and acquisitions of companies are an important component of economic strategies and strategies of management of cross-border companies in changing global markets. This paper adds to the existing scientific literature by providing results of the research, which sought to compare value creation through mergers and acquisitions in the European Union. Performed research has 6 major implications. 1. Announcement of merger and acquisition transactions affects the price of shares of the acquiring company. Shareholders of the acquiring company experience a short-term increase in the value of their assets at the time of the announcement of a merger and acquisition transaction. 2. Return or loss of the price of shares of acquiring companies generated at the time of announcement of a merger and acquisition transaction may be explained not only by characteristics of the transaction or the company, but also by the attributes of the country of registration of the acquiring company. 3. Shareholders of the acquiring company experience a greater short-term increase in the value of their assets when a company, originating in a country, which acceded to the EU in 2004 and later, is acquired or merged. 4. Shareholders of the acquiring company experience a greater short-term increase in the value of their assets when merger and acquisition transactions are concluded in cross-border rather than domestic market. 5. Cultural and institutional differences between the host (inward) countries of origin generate the increase in the share price at the time of announcement of the transaction. 6. Shareholders of the acquiring company enjoy greater benefits in a common law country than shareholders of a firm of a civil law country. [ABSTRACT FROM AUTHOR]