M&A Value Creation In Europe: An empirical event study on the short-term value creation in public-to-public transactions in Europe from 2000 to 2024

Jensen, Hans Christian Gert

4. semester

Economics and Business Administration (Finance), MSc.

2025

2025-06-01

79 pages

This thesis investigates short-term value creation in public-to-public M&A transactions in continental Europe from 2000 to 2024. While existing literature primarily focuses on earlier merger waves or U.S. markets, this study contributes to the academic field by analyzing a comprehensive European sample of 792 transactions, covering both the sixth and seventh merger waves. The goal of the thesis is to assess how M&A announcements affect the short-term shareholder value of target and acquiring firms and to identify which deal-, firm-, and macroeconomic-specific characteristics drive these effects. To address this, two hypotheses are tested. The first hypothesis examines whether M&A announcements have a statistically significant impact on Cumulative Abnormal Returns (CAR). This is assessed using two statistical models (Market Model and Constant Mean Return Model) and one economic model (Capital Asset Pricing Model). The thesis incorporates both local indices and a broader European index as benchmarks. To fully capture the market’s reaction and ensure comparability with existing literature, CAR is measured across four event windows: [-1; +1], [-3; +3], [-5; +5], and [-10; +10], with subsequent testing using parametric statistical tests. Consistent with prior research, target companies earn statistically significant positive abnormal returns across all models and event windows. As the event window expands, the CAR increases. In contrast, acquirers earn modest but statistically significant positive CARs exclusively in the shorter event windows [-1; +1], [-3; +3], and [-5; +5]. The choice of benchmark has little to no effect. Combined CARs are positive and significant, demonstrating net value creation for both parties. The second hypothesis examines the relationship between eleven categorical variables and CAR through multiple linear regression. For variables not significant in the regression, univariate analysis is conducted separately. For targets, all explanatory variables exhibit statistically significant relationships with CAR across all event windows, whereas for acquirers, the explanatory variables demonstrate statistical significance primarily in the shorter [-1; +1] and [-3; +3] event windows. For targets, higher CARs are associated with stronger financial health, relatively smaller size, hostile bids, all-cash payments, and non-sponsored deals. They also benefit from cross-border deals and diversification. Acquirers benefit from financial stability, relatively larger size, industry relatedness and domestic deals. Hostile takeovers reduce the acquirers’ CARs, while all-cash payments and non-sponsored deals enhance them. Finally, the effects of economic downturns during the dot-com bubble, financial crisis, and COVID-19 yield conflicting yet significant results for both parties, suggesting the need for further research.

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