The Impact of Merger and Acquisition Activities on Corporate Performance Measured on an Accounting and Market Base

Table of Contents

1 Introduction

1.1 Problem and research question

1.2 Research design

1.3 Structure of the paper

2 Literature review

2.1 Market-based studies

2.2 Accounting-based studies

3 Transactions

3.1 Fundamentals of transactions

3.1.1 The M&A term and basic forms of transactions

3.1.2 The M&A process

3.1.3 Motives for M&A activities

3.2 Key drivers of M&A

3.2.1 Determinants by Datta, Pinches and Narayanan (1992)

3.2.2 Determinants by Hitt et al. (2012)

3.2.3 Further relevant drivers of M&A

3.2.4 The underlying determinants for the empirical study

3.3 Development of transaction markets

3.3.1 Reasons for M&A waves

3.3.2 Development of the global market of corporate control

3.3.3 The German transaction market

4 Methodologies

4.1 Market-based measurement

4.2 Accounting-based measurement

4.3 Strengths and weaknesses

5 Empirical investigation

5.1 Data sample and screening procedure

5.2 Hypotheses

6 Statistical analyses and results

6.1 Market-based approach: Short-term shareholder’s return

6.1.1 Robustness

6.1.2 Bidding versus target companies

6.1.3 Univariate regression analysis

6.1.4 Multivariate regression analysis

6.2 Accounting-based approach: Long-term operating performance

6.2.1 Robustness

6.2.2 Bidding versus target companies

6.2.3 Univariate regression analysis

6.2.4 Multivariate regression analysis

6.3 Overall statement

7 Limitations and future outlook

8 Summary and conclusion

Research Objectives and Key Themes

This master thesis aims to analyze the success of German mergers and acquisitions (M&A) by evaluating the impact of key determinants on corporate performance. Using a unique dataset of German transactions, the study seeks to determine whether M&A activities create wealth for shareholders and improve long-term firm operating performance.

• Comparison of market-based (short-term) and accounting-based (long-term) performance metrics.
• Identification of deal-specific characteristics such as payment method and acquisition type.
• Evaluation of the influence of external factors like macroeconomic conditions and industry sectors.
• Assessment of performance differences between bidding and target firms in the German market.
• Utilization of univariate and multivariate regression frameworks to test identified hypotheses.

Excerpt from the Book

Summary of Chapters

1 Introduction: This chapter introduces the research context, outlines the problem statement regarding M&A performance in Germany, and defines the research design.

2 Literature review: This section summarizes existing academic research on M&A performance, contrasting market-based and accounting-based measurement studies.

3 Transactions: This chapter provides a theoretical background on M&A, including definitions, key drivers, and an overview of the development of global and German transaction markets.

4 Methodologies: This section details the empirical techniques used, specifically explaining market-based (event studies) and accounting-based performance metrics.

5 Empirical investigation: This chapter details the data collection, screening procedures, and the specific hypotheses tested in the study.

6 Statistical analyses and results: This section presents the quantitative findings of the research, including univariate and multivariate regression results for both short-term and long-term performance.

7 Limitations and future outlook: This chapter discusses data constraints and potential areas for future research.

8 Summary and conclusion: This final chapter synthesizes the main findings and provides a concluding statement on the profitability of German M&A activities.

Keywords

Mergers and acquisitions, M&A, Corporate performance, German market, Event study, Accounting-based measurement, Shareholder wealth, Operating performance, Regression analysis, Transaction drivers, Market efficiency, Synergy effects, Bid premiums, Financial reporting, Corporate control.

Frequently Asked Questions

What is the core focus of this master thesis?

The thesis examines the financial success of merger and acquisition activities specifically within the German market, using both market-based and accounting-based performance measurements.

What are the primary research themes addressed?

The research explores the impact of deal-specific characteristics (such as payment method, bid mood, and acquisition type) and external factors (macroeconomic conditions and industry sectors) on corporate performance.

What is the main research objective?

The primary goal is to determine if German M&A transactions lead to consistent wealth creation for shareholders and improved long-term operating performance for the involved companies.

Which methodologies are employed?

The study uses two main approaches: a short-term market-based event study to measure abnormal returns and an accounting-based analysis to evaluate long-term operating performance changes.

What does the main body of the work cover?

The main part of the work provides a literature review, a theoretical framework of transactions, an analysis of the development of the global and German transaction markets, detailed methodologies, and a statistical investigation of the defined hypotheses.

Which keywords define this work?

The work is defined by keywords such as M&A, corporate performance, event study, German market, shareholder wealth, and operating performance.

How is the German transaction market characterized in this study?

The German market is described as a relatively late developer in corporate control compared to the US or UK, but one that has professionalized and become an essential part of the German economy since the 1990s.

Does the study find M&A activities in Germany to be profitable?

The results suggest that while there are positive short-term market reactions, accounting-based evidence often points to a deterioration in long-term operating performance, implying that German M&A activities may not be profitable in the long run.

What role do industry sectors play in the findings?

Industry-specific differences are found to be a significant factor, with certain sectors showing higher abnormal returns and operating performance than others, which confirms the importance of controlling for these variables in M&A studies.