Glamorous Acquisitions in Telecommunications after the Market Liberalisation: Success or Failure?

Abstract

The academic literature indicates that “glamour” influences the investor’s behaviour. This article analyses the performance and value creation of the glamorous operations of mergers and acquisitions (M&A) in the telecommunications sector, trying to understand if these operations are conducive to stockholder wealth maximization. To conduct this analysis, the telecommunications M&A that occurred in the convulsed period of the internet bubble were counted as samples (1995–2010). The research concludes that glamour tends to be opposite to value creation in the long run: the glamour firms show significant value destruction and worse performance than non-glamour firms. Certain acquirers’ characteristics, such as size, are determinant in the glamour behaviour. This paper combats the shortage of research of a quantitative sectoral nature on telecommunications M&As, when leading international companies like Vodafone, Cable and Wireless, France Telecom or Telecom Italia are very active in this kind of operations.