Bösecke Value Creation in Mergers, Acquisitions, and Alliances

2009
ISBN: 978-3-8349-8316-9
Verlag: Betriebswirtschaftlicher Verlag Gabler
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 192 Seiten, eBook

Kathrin Bösecke analyses the factors that determine the success of business combinations. Based on her analysis of 126 acquisitions and 66 alliances in the European utility industry, she identifies the origin of the participating firms as well as the target country as essential determinants of value creation.

Dr. Kathrin Bösecke completed her doctoral thesis at Jacobs University Bremen.

Zielgruppe

Research

Autoren/Hrsg.

Bösecke, Kathrin

Inhaltsverzeichnis

1;Foreword;6
2;Preface;7
3;Table of Contents;8
4;List of Figures;10
5;List of Tables;11
6;Abbreviations;13
7;1 Introduction;14
7.1;1.1 Background;14
7.2;1.2 Scope and aim of the study;15
7.3;1.3 Organization of the study;17
8;2 Fundamentals;18
8.1;2.1 Definition of business combination;18
8.2;2.2 Types of business combinations;19
8.3;2.3 Business combinations from a perspective of corporate growth;22
8.4;2.4 Business combinations from a process perspective;23
8.5;2.5 Business combinations and success;26
8.6;2.6 Relevant theories for business combinations;28
9;3 Value creation in mergers and acquisitions – theoretical paradigms and past research;38
9.1;3.1 Theoretical background;38
9.2;3.2 Past research;46
9.3;3.3 Summary and conclusions;53
10;4 Value creation in alliances – a meta-analysis;54
10.1;4.1 Introduction;54
10.2;4.2 Theoretical background and hypotheses;55
10.3;4.3 Method;62
10.4;4.4 Sample;64
10.5;4.5 Results;67
10.6;4.6 Discussion;69
10.7;4.7 Summary and conclusions;72
11;5 A quantitative analysis of value creation in business combinations – in the European utility industry;74
11.1;5.1 Analysis of the European utility industry;75
11.2;5.2 Derivation of hypotheses;83
11.3;5.3 Method;100
11.4;5.4 Sample;106
11.5;5.5 Results and discussion for the investigation of M&As;113
11.6;5.6 Results and discussion for the investigation of alliances;135
12;6 Summary;155
13;Appendices;158
14;References;170

Fundamentals.- Value creation in mergers and acquisitions – theoretical paradigms and past research.- Value creation in alliances – a meta-analysis.- A quantitative analysis of value creation in business combinations – in the European utility industry.- Summary.

Leseproben

1 Introduction (p. 1)

1.1 Background

In today’s corporate world, many companies are joining forces and combining resources in response to a rapidly changing environment, nearly every day a new acquisition or alliance is announced and covered in the corporate press.

Globalization, rapid technological progress, shorter product life cycles, and in many places, stagnating markets are putting companies under increasing competitive pressure thus requiring them to effectively manage new challenges with respect to their national and international competitiveness. Within this context, business combinations are important strategic modes for firm growth and restructuring (e.g., Campa and Hernando, 2002, Capron, 1999, Haspeslagh and Jemison, 1991).

Acquisitions and alliances, though, are not a new phenomenon, already in the second half of the 19th century, various companies—mainly in the oil, tobacco, and steel industries—had combined businesses and formed monopolies, in the US this led to the passage of the 1890 antitrust law to break up the restricted competition.

By the time of the stock market crash in 2001 there had been five further significant merger waves. In the last merger wave of the 1990s—driven by globalization, an orientation towards shareholder value, and internationalization—the number and size of the deals skyrocketed. In 2000, the biggest deal yet was announced: the takeover of Mannesmann by Vodafone for $182 billion, although there was a brief slump in M&A activity in the two years after the stock market bubble burst, 2003 was marked by an upturn and deal volumes have again passed previous records.

In 2007, on a worldwide basis, firms spent over $4.38 trillion on mergers and acquisitions (see, e.g., Hall, 2007), a 21 percent increase over transaction volume in 2006 and higher even than the previous record of $3.4 trillion in 2000. In 2008, the financial crisis brought about plunging stock markets, a lack of available credit for firms and a limited ability for companies to make acquisitions.

Thus, global merger volume dropped to $2.89 trillion and five years of continous deal growth ended (see, e.g., Hall, 2008). It is hard to say when deal volumes will start to increase again given a recession in major economies, however, in consideration of the past, it seems sure that M&As will always remain important strategic modes in the corporate world.

During the past decade, acquisition activity has been particularly high in the European utility industry, deregulation in most European countries has led to a veritable merger wave in the industry and to the creation of mega-players in the market. For example, the largest takeover bid in Europe, in 2005, was made by the German utility company E.On, which offered $56.62 billion for the Spanish utility company Endesa.

In addition to mergers and acquisitions, alliances are an alternative form of corporate growth, both typically offer a more rapid means of corporate expansion than does internal growth. Unlike internal growth processes, they are not characterized by long-term ongoing efforts to procure and combine resources.

They allow a firm to instantly expand its strategic options by combining its own resources and capabilities with the resources and capabilities of the acquisition target or the alliance partner respectively (Schaper-Rinkel, 1997, 53).

The risks of go-it-alone-strategies are thus circumvented and the firms involved are able to quickly take hold of existing combination potentials. The overarching reason for combining with another organization is to achieve strategic goals more quickly and inexpensively than would be possible if a company acted on its own (Haspeslagh and Jamison, 1991).

These characteristics may be very valuable in this era of intense and turbulent change, in which it is necessary for firms to quickly adapt and close critical gaps in their resource profiles in order to remain competitive. In light of the high relevance of business combinations for firms in the past—and most likely in the future, as well—many scholars have examined success and failure rates for mergers and acquisitions, with the emergence of alliances as an important strategic option for business firms in the 1980s, researchers also began to investigate the success and failure of alliances.

Existing empirical studies on the success of business combinations do not uniformly support managers’ apparent enthusiasm for external growth. Estimated failure rates are typically between 60 and 80 percent for acquisitions (Marks and Mirvis, 2001) and between 30 and 60 percent for alliances (Das and Teng, 2000). Against this background, studying the factors that influence the success of business combinations is a promising field for research.

Über Autor(innen)

Dr. Kathrin Bösecke completed her doctoral thesis at Jacobs University Bremen.