Acquisition Transactions Research Articles

Unwanted signals: the effect of financial restatement in acquisition transactions

Despite considerable contribution from signaling theory to management literature, few scholars have examined the effect of value-destroying signal. By extending the argument in signaling theory, we...

The Rediscovery of Bisantrene: A Review of the Literature

Bisantrene is an anthracene with anthracycline-like antitumor activity that has been the subject of over 60 clinical trials but which was lost for over 30 years due to various merger and acquisition transactions. In over 2000 patients, bisantrene has been well tolerated and shown to lack the cardiac dose-limiting toxicity of the anthracycline class and perhaps to lack a propensity to induce multi-drug resistance. Aside from inhibition of topoisomerase II, macrophage-activating activity and telomerase inhibiting activity have been reported for this agent. Within an extensive body of publications comprising over 40 clinical trials, clinical activity has been documented in a number of indications, including lymphoma, refractory breast cancer, and ovarian cancer. In 7 phase 2 trials, therapeutic utility was seen in acute myeloid leukemia (AML) comparable or superior to drugs currently in development. Although never marketed, bisantrene was approved for the treatment of AML in France in 1991 under the name Zantrene. Originally developed in the 1970s and 1980s, bisantrene is a well-tolerated and useful drug that has resumed clinical development.

The impact of M&A strategies on the operating performance and investments of European IPO firms

We study the post-initial public offering (IPO) operating performance of 245 European firms that completed merger and acquisition (M&A) transactions after going public, examining the asset profitability (return on assets) and cost efficiency (return on sales). Controlling for performance persistence, we find that acquiring IPO firms do not generally perform differently from their non-acquiring counterparts. However, they exhibit a significant drop in operating performance that is common to most IPO firms: this latter effect is stronger with larger investments in M&A activity compared to company assets and with larger increases in operating working capital. We find the worst operating profitability when acquisitions are also paid with stock. When the acquisition is intended for business diversification, there is no impact on asset profitability, but we find a decrease in operating margins. Interestingly, we find no substitution effects between M&A activity and other alternative investments. Investments in intangible assets and capital expenditure by acquiring IPO companies are not significantly different from those by non-acquiring IPO firms.

Investment Banks as Financial Advisors in Malaysian Mergers and Acquisitions

Our study examines the factors that affect the choice of hiring an investment bank as financial advisor in the merger and acquisition transactions of Malaysian acquirers. In the period from January 1995 to December 2012, approximately 38.6 percent of the Malaysian acquirers hire an investment bank when conducting M&A transactions. On the other hand, 23.8 percent of the target firms employ at least one investment bank as financial advisor when dealing with Malaysian bidders. Our findings reveal that both participants tend to hire an investment bank when the acquirer operates in the technology sector, the deal takes place in a crisis period and the value of the transaction is high. An acquirer who has a high debt ratio is less likely to employ an investment bank and a publicly traded target is more likely to employ an investment bank in their M&A transactions. Moreover, our results show that, in a complex environment, the hiring of an investment banking is not for the valuation purpose.

Due Diligence in Mergers and Acquisitions with International Components

Merger and Acquisition Transactions require significant due diligence by the parties to the transaction. If merger the transaction has international aspects or components, then required due diligence is magnified dramatically. The article sets out issues that need to be investigated when there is that international component. These issues are rarely investigated, because the issues are not well known to those tasked with conducting due diligence on the transaction, nor how the investigation of the issues should be conducted.

Full-Stock-Payment Marginalization in Merger and Acquisition Transactions

The number of merger and acquisition (M&A) transactions paid fully in stock in the U.S. market declined sharply after 2001, when pooling and goodwill amortization were abolished by the Financial Accounting Standards Board. Did this accounting rule change really have such far reaching implications? Using a difference-in-differences test and Canada as a counterfactual, this study reveals that it did. We also report several other results confirming the role of pooling abolishment, including (i) that the decrease in full stock payment relates to CEO incentives and (ii) that previously documented determinants of the M&A mode of payment cannot explain the post-pooling abolishment pattern. These results are also robust to controls for various factors, such as the Internet bubble, the exclusion of cross-border deals, the presence of Canadian cross-listed firms, the use of a constant sample of acquirers across the pooling and post-pooling abolishment periods, the use of Europe as an alternative counterfactual, and controls for the SEC Rule 10b-18 share repurchase safe harbor amendments of 2003. This paper was accepted by Shivaram Rajgopal, accounting.

Value creation and the probability of success in merger and acquisition transactions

This paper presents and tests a hypothesis that expands existing explanations of value creation in merger and acquisition (M&A) transactions. The main premise is that value creation is determined by not only the target’s pre-acquisition value, as indicated by numerous studies in extant literature, but also by the acquirer’s competency (among other factors) demonstrated by their pre-merger financial ratios. The paper shows that M&A transactions create value in the longer-run and the gain is commensurate with the acquirer’s historical performance and the target’s pre-acquisition value. Further, the paper employs statistical procedures and model-building techniques in order to develop and validate parsimonious Altman-style predictive models. The models reasonably identify successful M&A deals and are statistically significant and consistent with a few existing theories. Specifically, the evidence on liquidity supports internal capital markets hypothesis but does not support the theories of agency problems, while the evidence on financial leverage supports the view that lower debt enhances corporate control.

Post-merger Integration Approaches: Case Analysis of the One. Vip Macedonia Merger

Selecting the best integration approach is a meticulous and sensitive process that can mold the completion of the merger and/or acquisition transaction. In this paper, I discuss that implementing the proper integration approach leads to mitigating or increasing impending risks when going into major company restructuring events. If proper selection and execution takes place, and all related processes and expectations of the parties involved are duly taken into account, successful post-merger integration can be concluded in the Republic of Macedonia in spite of numerous difficulties. One of the greatest risk factors certainly lies in the satisfaction or dissatisfaction of the work force which is of vital meaning for the operational excellence of every entity. Three different integration approaches - absorption, symbiosis, and preservation - are observed through literature overview and particular transactions. Additionally, I study the example of the integration approach adopted by one. Vip doo Skopje following the merger of Vip operator dooel Skopje and ONE in 2015, accentuating that multiple factors can increase or deteriorate the chances of integration success.

Cultural Differences, Synergies and Mergers and Acquisitions

I use textual analysis of 10-K forms to develop an estimate of the differences in corporate cultures of the combining firms, and find that greater cultural differences between the combining firms lead to higher synergistic gains in mergers. The effect of cultural differences on acquisition synergy remain even after controlling for selection bias and known synergy factors. Cultural differences are associated with synergies only when the acquirer has a stronger culture than its target, and the synergy gains concentrate among deals where the acquirer’s values are not antagonistic to the target’s. Further analysis of profitability and productivity (measured as earnings per employee) before and after the acquisition transaction corroborates these findings. Overall, the evidence suggests that differences in corporate culture are an important driver of announcement returns in mergers and acquisitions.

A statistical approach to the analysis of merger and acquisition efficiency in the Russian industry

At present, the success of economic institution transformations, as well as creating an efficient economic system with a fundamental new nature of corporate relationships are impossible without the statistical recording of factors contributing to the efficiency of merger and acquisition transactions in the Russian industry. The paper proposes a method for analyzing the efficiency of merger and acquisition transactions of enterprises in the industrial sector of the Russian economy, based on simulation methods. The methodical approach developed to analyze the efficiency of the integration transactions of Russian industrial companies allows one to consider individual preferences of investors, as well as to give a complex statistical evaluation of the strategic economic benefits from M&A transactions. This method enables to evaluate the probability and stability of the synergistic effect values within the increase of competitiveness of Russian industrial enterprises on the domestic and foreign markets.

Запрет на перекрестное владение СМИ как средство ограничения медиаконцентрации (на примере деятельности компаний «Ньюс корп» и «XXI сенчури фокс» Р. Мэрдока в Австралии, Великобритании и США)

This article is an analysis of the practice of implementation and effectiveness of laws prohibiting cross-media ownership in Australia, the UK and the USA. The author pays attention to the evolution of antitrust laws in the field of media business and modern principles of their implementation, as well as traces the connections between the liberalization of antimonopoly regulation and intensification of the process of concentration of media ownership. The research urgency is attributable to the fact that the consolidation of media ownership today has reached a critical level and poses a serious threat to freedom of expression and media diversity in most countries of the world. In the present work this problem is explored on the example of activity of the companies “News Corp” and “XXI Century Fox” owned by R. Murdoch. The author analyses the acquisition transactions of print and broadcast media (already completed by R. Murdoch and currently under consideration by competition authorities) from the point of view of their conformity to the current legislation, as well as their impact on the level of media concentration, availability of information services and their diversification. The article presents the latest data on the state of the media market in Australia, the UK and the US and recent reforms in the field of media regulation, which allows the author to draw a conclusion about the expected intensification of the process of concentration of the media ownership in the coming years and the increase in the number of its negative effects on the back of further liberalization of media regulation and inefficient work of the Antimonopoly services.

Governments in the market for corporate control: Evidence from M&A deals involving state-owned enterprises

Recent evidence suggests that state-owned enterprises (SOEs) are increasingly taking over other firms. Such domestic or transborder acquisitions are the reverse of privatizations, where SOEs are the target of private investors. The question we ask is whether, because of the specific objectives and risks faced by governments, SOEs deviate from the benchmark of deals involving private firms on both sides of the merger and acquisition (M&A) transaction. To answer this new research question, we focus on a set of firm-level characteristics of the targets and acquirers involved in the deals. We built an original dataset of 31,479 deals in 138 countries drawing from Zephyr and Orbis (Bureau Van Dijk) data. Empirical results of multinomial logit and OLS models show that deals involving SOEs are clearly different from the benchmark of private–private deals. This is mainly due to the greater assets, higher solvency ratios, broader experience of deals, and closer proximity to targets of the acquirers (both public and private) under public–private, public–public, and private–public deals compared to private–private deals.

The causes and consequences of delayed/abandoned cross-border merger & acquisition transactions

PurposeDrawing attention to the significant number of unsuccessful (abandoned) cross-border merger and acquisition (M&A) transactions in recent years, the purpose of this paper is to analyze three litigated cross-border inbound acquisitions that associated with an emerging economy – India, such as Vodafone-Hutchison and Bharti Airtel-MTN deals in the telecommunications industry, and Vedanta-Cairn India deal in the oil and gas exploration industry. The study intends to explore how do institutional and political environments in the host country affect the completion likelihood of cross-border acquisition negotiations.Design/methodology/approachNested within the interdisciplinary framework, the study adopts a legitimate method in qualitative research, that is, case study method, and performs a unit of analysis and cross-case analysis of sample cases.FindingsThe critical analysis suggests that government officials’ erratic nature and ruling political party intervention have detrimental effects on the success of Indian-hosted cross-border deals with higher bid value, listed target firm, cash payment, and stronger government control in the target industry. The findings emerge from the cross-case analysis of sample cases contribute to the Lucas paradox – why does not capital flow from rich to poor countries and interdisciplinary M&A literature on the completion likelihood of international takeovers.Practical implicationsThe findings have several implications for multinational managers who typically involve in cross-border negotiations. The causes and consequences of sample cases would help develop economy firms who intend to invest in emerging economies. The study also offers some implications of M&A for telecommunications and extractive industries.Originality/valueAlthough a huge amount of extant research investigates why M&A fail to create value to the shareholders during the public announcement and post-merger stages, there is a significant dearth of research on the causes and consequences of delayed or abandoned national and international deals. The paper fills this knowledge gap by discussing an in-depth cross-case analysis of Indian-hosted cross-border acquisitions.

Addressing Informational Challenges with Earnouts in Mergers and Acquisitions

This essay examines the role played by earnouts in mergers and acquisitions transactions. When one party is better informed of the true value of the deal than the other, the parties face the well-known “lemons” problem, which could prevent them from consummating the transaction even when both are aware that the deal will produce a positive (but uncertain) surplus. By harnessing post-closing, verifiable information, earnouts allow the transacting parties to overcome this informational challenge. The essay also analyzes (1) how the adoption and the size of an earnout will vary depending on the various characteristics of the transaction and (2) the earnout design issues when the parties face the problems of ex post moral hazard, such as engaging in inefficient behavior to either maximize or minimize the earnout payment.

Due Diligence Driving the Success of Mergers and Acquisitions in Macedonia

The act of due diligence is of vital importance when considering the possibility to enter the Macedonian market through merger and/or acquisition transactions. In this paper, I discuss that due diligence helps reduce potential risks or even results with curtailing the transaction as most of the Letters of intent never come to life. Many Macedonian entities, both public and private, operate in an environment considerably different to the European Union economies, a fact that inspires many questions with potential investors, especially in those who come from the European Union. If proper preparation takes place, and the expectations and processes are duly taken into account, successful merger and/or acquisition can be conducted in the Republic of Macedonia in spite of facing numerous difficulties. Finally, I discuss that several suggestions/factors can maximize the chances of success, demonstrated with the example of due diligence process set-up prior to the one.Vip merger that marked the Macedonian communications industry in 2015.

M&A in the high tech industry: value and valuation

Purpose In the past decade, a high substantial number of academic literature and press articles have questioned merger or acquisition (M&A) transactions. If this enthusiasm towards M&A can be explained by the importance and the influence of any merger or acquisition decision for a company, it can be also attributed to the volume and the number of transactions that have been reported. This paper aims to analyse the value and the valuation of the most recent M&A deal in high tech industry. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings The valuation tools and methods play a central role in M&A deal. Improving these tools to capture the uncertainty that embeds M&A deals remain the most challenging task for both practitioners and researchers. Practical implications The paper provides strategic insights and practical thinking that have influenced some of the world’s leading organizations. Originality/value The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

ŞİRKET BİRLEŞME VE SATIN ALMALARININ FİRMA VE SEKTÖR DÜZEYİNDE ETKİLERİ: BİR LİTERATÜR TARAMASI

The objective of this study is to provide a literature review consisting of studies investigating the impact of mergers and acquisition (M&A) transactions at the micro and macro levels. The review has three different parts. In the first part, the focus is on the macro effects of M&A transactions and the impact of these transactions at the industry and market levels as well as their determinants are investigated. The second part comprises studies analyzing the effects of M&A transactions on the financial performance of the acquirer and target companies. In the third and final section, the factors affecting the financial performance changes as a result of M&A transactions are discussed.

ŞİRKET BİRLEŞME VE SATIN ALMALARININ FİRMA VE SEKTÖR DÜZEYİNDE ETKİLERİ: BİR LİTERATÜR TARAMASI

Bu çalışmanın amacı şirket birleşme ve satın alma (B&S) işlemlerinin hem mikro hem makro düzeyde etkilerini konu alan çalışmaları inceleyen bir literatür çalışması ortaya koymaktır. İnceleme üç ayrı kısımda gerçekleştirilmiştir. Birinci kısımda B&S işlemlerine makro düzeyde yaklaşan çalışmalar ele alınarak, bu işlemlerin sektör ve piyasa düzeyinde etkileri ile bu işlemlerin sayısını etkileyen faktörler üzerinde durulmaktadır. İkinci bölümde B&S işlemlerinin katılımcı firmaların finansal performansında meydana getirdiği değişiklikleri inceleyen çalışmalara yer verilecekmiştir. Üçüncü ve son bölümde ise B&S işlemleri sonrası performans değişimine etki edeceği düşünülen faktörlerden bahsedilmektedir.

Due Diligence in Share Acquisitions: Navigating the Insider Trading Regime

The goal of this paper is to unpack the underlying friction between the need to facilitate due diligence in share acquisition transactions that could place inside information in the acquirer’s hands, and at the same time to ensure that such information is not misused by the acquirer to the detriment of the other shareholders, a matter that insider trading regime regards as sacrosanct. In analysing and seeking to resolve this tension, this paper draws upon examples from three jurisdictions, namely the United Kingdom (UK), Singapore and India. The core argument of this paper is that from a theoretical perspective the due diligence objective of acquirers can be reconciled with the goals of the insider trading regime in order to preserve the interests of the target shareholder as long as certain restrictions are placed on the conduct of the acquirer.

Acquisition of Hutchison Essar (India) by Vodafone (U.K.): A Case in International Taxation of Indirect Transfer of Shares

ABSTRACT Vodafone is recognized globally as a seminal case in which the taxation of indirect transfer of shares was litigated before a country's highest judicial court. Vodafone Group plc, through a web of its directly and indirectly owned subsidiaries in different tax jurisdictions, acquired a majority interest in Hutchison Essar, an Indian telecommunications company. For failing to withhold taxes, the Indian Revenue Service has assessed $5 billion in taxes and penalties on Vodafone. Whether India's position to tax indirect transfer of shares between two non-Indian entities is consistent with the practices of OECD countries such as the U.S. and whether such tax measures help economic competitiveness are hotly debated topics. The case can be used in a graduate course in international taxation, or in a capstone course to address the topics of tax research and tax policy. It helps students to (1) research tax literature in the U.S. and a foreign country and apply it to a real-world context, (2) understand a complex acquisition transaction and its tax ramifications, (3) determine whether a similar transaction would be taxable in the Organisation for Economic Co-operation and Development (OECD) countries, and (4) evaluate the pros and cons of taxing the transfer of shares between two foreign entities by tax authorities.