Advantages M&a Banking Industry
Determinants of Growth through Mergers and Acquisitions: An Empirical Analysis
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Mathieu Luypaert European University College Brussels (EHSAL) Department of Accountancy, Finance and Insurance Katholieke Universiteit Leuven Nancy Huyghebaert∗ Department of Accountancy, Finance and Insurance Katholieke Universiteit Leuven
Abstract This paper empirically investigates the determinants of external growth through mergers and acquisitions (M&As) in a typical Continental European country, Belgium. For this purpose, we use data on 378 private and listed firms that engaged in 816 M&A transactions during 1997–2005, and match this sample with companies that did not pursue any external growth. By analyzing bidder characteristics, industry and aggregate market variables, we are able to determine what motives are important in the decision to acquire. Our results show that intangible capital, leverage and firm size significantly positively affect the decision to grow through M&As whereas the proportion of debt that consists of bank loans and ownership concentration have a negative impact. Furthermore, M&As are significantly more likely in industries that were recently deregulated, that are less concentrated and where industry incumbents are operating at a relatively low scale. Also, the data indicate that internal and external investments are independent growth strategies. The results further show that the determinants of the M&A decision differ significantly in low- versus highgrowth industries. Finally, investigating related versus diversifying M&As provides evidence supporting the market power and bankruptcy avoidance theory. Keywords: mergers and acquisitions, growth, motives, ownership, financing JEL: G32, G34
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The authors thank Katrien Craninckx, Stefan Duchateau, Filip Roodhooft, Tom Van Caneghem, Cynthia Van Hulle, Christine Van Liedekerke and the participants at the 25th Erasmus Finance Day (Rotterdam) for useful comments on an earlier draft of this paper.
by
Mathieu Luypaert European University College Brussels (EHSAL) Department of Accountancy, Finance and Insurance Katholieke Universiteit Leuven Nancy Huyghebaert∗ Department of Accountancy, Finance and Insurance Katholieke Universiteit Leuven
Abstract This paper empirically investigates the determinants of external growth through mergers and acquisitions (M&As) in a typical Continental European country, Belgium. For this purpose, we use data on 378 private and listed firms that engaged in 816 M&A transactions during 1997–2005, and match this sample with companies that did not pursue any external growth. By analyzing bidder characteristics, industry and aggregate market variables, we are able to determine what motives are important in the decision to acquire. Our results show that intangible capital, leverage and firm size significantly positively affect the decision to grow through M&As whereas the proportion of debt that consists of bank loans and ownership concentration have a negative impact. Furthermore, M&As are significantly more likely in industries that were recently deregulated, that are less concentrated and where industry incumbents are operating at a relatively low scale. Also, the data indicate that internal and external investments are independent growth strategies. The results further show that the determinants of the M&A decision differ significantly in low- versus highgrowth industries. Finally, investigating related versus diversifying M&As provides evidence supporting the market power and bankruptcy avoidance theory. Keywords: mergers and acquisitions, growth, motives, ownership, financing JEL: G32, G34
∗
The authors thank Katrien Craninckx, Stefan Duchateau, Filip Roodhooft, Tom Van Caneghem, Cynthia Van Hulle, Christine Van Liedekerke and the participants at the 25th Erasmus Finance Day (Rotterdam) for useful comments on an earlier draft of this paper.
References: 36 Bruner, R.F., Applied Mergers and Acquisitions, John Wiley & Sons, 2004 41 Nelson, R., Merger movements in American Industry 1895–1956, Princeton: Princeton University Press, 1959