On mergers and acquisitions in Greece - before and after the onslaught of the economic crisis

Abstract

This study examines the impact of mergers and acquisitions (M&As) on the post-merger performance of Greek listed firms using accounting variables (profitability ratios). We examine firm profitability for the first years after M&As and in the long-run (before and after the onslaught of the economic crisis). For the purpose of the study, a set of five profitability ratios is employed for the examination of fifty mergers, in order to measure firms' post-merger performance and to compare pre- and post-merger firm profitability before and after the M&As announcements. To delve deeper, we analyze with nonparametric tests seven qualitative variables as strategic choices of the sample firms in M&As' past decisions: selection of merger or acquisition, hostile takeovers or friendly M&As, legal form and valuation of the target firm, method of payment, decision for an international merger or not and the type of the target's production line. We find these ratios to be statistically insignificant indicating firms do not experience a post-merger improvement in accounting performance the first years after M&As (before the outbreak of the economic crisis in Greece), but there is a partial deterioration of the post-merger performance in the long-run (during the economic crisis). In contrary, regarding the strategic choices during the first years after M&As, we provide evidence that the selection of acquisitions than mergers, as well as hostile takeovers than friendly M&As, affect positively firm profitability. Similar positive effects we have found concerning legal form of the target firm and method of the target valuation. We found no change in other examined strategic choices as method of payment, international merger or not, target's production line. The present study could be useful to several interested parties as a recent empirical result. Firstly, to business executives, consultants or potential investors that want to proceed on a possible investment through mergers or acquisitions in Greece, as several business characteristics for successful business strategies have been proposed. Secondly, for policy makers, tax and other state authorities paints a recent picture for M&As activities in Greece before and after the outbreak of economic crisis.