Transaction Announcements Research Articles

Value drivers of development stage biopharma companies

ObjectiveScholars previously estimated research and development (R&D) costs of the internal drug development process. However, little is known about the costs and value arising from externally acquired therapeutics. This study identifies and estimates the magnitude of factors associated with Biopharma acquisition value.MethodsSDC Thomson Reuter and S&P Capital IQ were screened for majority acquisitions of US and EU Biopharma companies developing new molecular entities for prescription use (SIC code: 2834) from 2005 to 2020. Financial acquisition data were complemented with variables characterizing the target’s product portfolio extracted from clinicaltrials.gov, Drugs@FDA database, US SEC filings, and transaction announcements. A multivariate regression assesses the association of firm value with extracted variables.Results311 acquisitions of companies developing prescription drugs were identified over the study period. Acquirers paid 37% (p < 0.05) more for companies with biologics and gene therapeutics than small-molecule lead drugs. Multi-indication products were acquired for a 12% premium per additional indication (p < 0.01). No significant valuation difference between companies developing orphan and non-orphan designated lead products was observed (18%, p = 0.223). Acquisition value positively correlated with the total number of further products, headquarter location in the US, underlying market conditions, and acquirer market capitalization (p < 0.05).ConclusionsInternal and external drug development consumes many financial and human resources, yet it is important for entrepreneurs, regulators, and payers to understand their precise magnitude and value drivers. This information permits the design of targeted pricing and industrial policies that incentivize the development of novel drugs in areas with high unmet needs.

Post Financial Crisis Transaction Trends of U.S. Biotechnology Firms

Transactions announcements can signal the health of an industry. This article examines all biotechnology transaction announcements occurring in the U.S. between 2010 and 2017. A baseline comparison to the pre-financial crisis transaction announcements of 2002 through 2006 is provided. Our study finds a significant rebound in the number of transactions during the time of study and continuing shifts by those on both ends of the transactions.

Comparison of Value Creation through M&amp;A in European Union

Mergers and acquisitions of companies are an important component of economic strategies and strategies of management of cross-border companies in changing global markets Performed research has 6 major implications. 1. Announcement of merger and acquisition transactions affects the price of shares of the acquiring company. Shareholders of the acquiring company experience a short-term increase in the value of their assets at the time of the announcement of a merger and acquisition transaction. 2. Return or loss of the price of shares of acquiring companies generated at the time of announcement of a merger and acquisition transaction may be explained not only by characteristics of the transaction or the company, but also by the attributes of the country of registration of the acquiring company. 3. Shareholders of the acquiring company experience a greater short-term increase in the value of their assets, when a company originating in a country, which accessed the EU in 2004 and later, is acquired or merged. 4. Shareholders of the acquiring company experience a greater short-term increase in the value of their assets, when merger and acquisition transactions are concluded in cross-border rather than domestic market. 5. Cultural and institutional differences between the host (inward) country of origin generate the increase in the share price at the time of announcement of the transaction. 6. Shareholders of the acquiring company enjoy greater benefits in a common law country than shareholders of a firm of a civil law country. DOI: http://dx.doi.org/10.5755/j01.ee.30.2.21981

Reprint of “The impact of mergers and acquisitions on shareholders' wealth in the logistics service industry”

Logistic service providers are facing significant challenges in recent years due to intensified competition and ever-increasing customer expectations for cohesive high-standard services at low cost. To cope with these developments many companies aim for external growth to realize operational efficiencies and exploit productive opportunities of new markets and diversified services. Accordingly, 2015 has even become the most active year for mergers and acquisitions in logistic service industry. However, studies examining the post-merger performance effect and its determinants are scarce. Consequently, this paper takes up this issue by analysing a sample of 826 transaction announcements taken place between 1996 and 2015 and their performance effect in terms of short- and long-term abnormal shareholder returns. The results reveal, that although overall transactions exhibit significant positive abnormal returns, post-merger performance for the acquiring companies differs considerably according to the logistic services offered. In the short-term trucking, railway, 3PL and air cargo companies experience significant positive abnormal returns of about 0.6%–2.6%, while sea freight carriers realize only marginal effects and CEP companies do even not show any significant reaction. In the long-term, railway and 3PL companies realize a significant abnormal return of about 20%–24%, while trucking, sea freight and air cargo carriers do not exhibit significant returns and CEP companies do even experience significant losses of about −17%. Overall, diversifying transactions of established full-service providers outperform focus-increasing transactions of specialized operators.

The impact of mergers and acquisitions on shareholders' wealth in the logistics service industry

Logistic service providers are facing significant challenges in recent years due to intensified competition and ever-increasing customer expectations for cohesive high-standard services at low cost. To cope with these developments many companies aim for external growth to realize operational efficiencies and exploit productive opportunities of new markets and diversified services. Accordingly, 2015 has even become the most active year for mergers and acquisitions in logistic service industry. However, studies examining the post-merger performance effect and its determinants are scarce. Consequently, this paper takes up this issue by analysing a sample of 826 transaction announcements taken place between 1996 and 2015 and their performance effect in terms of short- and long-term abnormal shareholder returns. The results reveal, that although overall transactions exhibit significant positive abnormal returns, post-merger performance for the acquiring companies differs considerably according to the logistic services offered. In the short-term trucking, railway, 3PL and air cargo companies experience significant positive abnormal returns of about 0.6%–2.6%, while sea freight carriers realize only marginal effects and CEP companies do even not show any significant reaction. In the long-term, railway and 3PL companies realize a significant abnormal return of about 20%–24%, while trucking, sea freight and air cargo carriers do not exhibit significant returns and CEP companies do even experience significant losses of about −17%. Overall, diversifying transactions of established full-service providers outperform focus-increasing transactions of specialized operators.

Using Option Prices to Infer Overpayments and Synergies in M&amp;A Transactions

In this paper, we use call option prices to identify synergies and news from merger and acquisition (M&A) transaction announcements. We find that M&A announcements result in large and approximately equal gains to the bidder and the target on average, with the combined gains being large enough to justify the premium paid to target shareholders. On average, M&A announcements release good news about targets, but bad news about bidders. This suggests that market prices understate true synergy gains, and helps reconcile the generally negative market-based evidence on value-creation in takeovers with their continued prominence in everyday business strategy.

The Stock Market Response to Securitisation Announcements of Turkish Banks

This paper analyses the impact of securitisation announcements on the originator banks’ share prices. In order to verify any significant impact, an event study methodology applied to the securitisation transaction announcements for the banks listed in Istanbul Stock Exchange Market (ISEM) between 2003 and 2010.The primary finding is that the market reacts positively to securitisation announcements. Also, in order to demonstrate any effect of upcoming of Global Financial Crisis, a dual partition is constructed. In the first period between 2003 and 2005 the returns were positive; in the following period between 2006 and 2010 the abnormal returns were insignificantly negative. This result suggests that the returns from the securitisation announcements are time dependent.Additional analysis indicates that the impact of securitisation is positively associated with prior profitability of the originator bank and the relative amount of the securitised assets. There was also a negative relationship between the prior liquidity of the bank and the return: the lower the prior liquidity of the bank, the higher the returns. These results are inferred as market assesses the financial slack positively – conditional upon the profitability of the bank. If the proceeds of the securitisation transaction are likely to be reinvested in positive net present value projects, the market sees the wealth generation opportunity and discounts the transaction accordingly.

Corporate social responsibility: the financial impact of black economic empowerment transactions in South Africa

Corporate social responsibility (CSR) has recently received considerable attention in literature. One of the vehicles by which companies can conform to CSR in South Africa is Black Economic Empowerment (BEE). In this regard, BEE has been employed to assist previously disadvantaged groups of investors obtain a larger share of the equity of South African listed companies. The question has often been asked whether the announcement of BEE transactions by listed companies increases shareholder wealth. This article tries to answer this question by examining the share performance of 125 BEE transactions involving 95 companies during the period January 2002 to July 2006. The results indicate a positive relation between BEE transaction announcements and shareholder wealth creation, but only during the last part of the period covered by the study.

Brand transaction announcements and stock price volatility

PurposeThis paper aims to investigate the potential relationship between the stock market announcement of a brand's buy and sell agreement, and the stock price trend.Design/methodology/approachThe research question was approached using a GARCH‐based statistical analysis on a sample of companies listed on the Mibtel (Italian stock exchange) that have a brand among their assets and have undertaken a purchase/sale from 2006 to 2008.FindingsAlthough the brand is believed to be an important value driver, the mere occurrence of a purchase/sale operation for this asset only occasionally leads to a reaction in the market; at any rate, the stock's volatility quite rarely depends solely on such an occurrence.Research limitations/implicationsThe statistical relevance of the analysis is limited by the observational data that it was possible to analyse. In particular, to give a positive conclusion about the influence of the brand's buy and sell agreements on a stock's return, it is necessary to have a time series of a greater number of firms. A larger availability of data might, in the future, allow a more detailed analysis and the opportunity to investigate the possible impacts of the event with relation to the business's characteristics – something that could not be carried out in this study because of the aforementioned problems.Practical implicationsResearchers and practitioners are now aware that the market does not always look upon the operations of a brand's buy and sell agreement as value‐relevant.Originality/valueThe originality of the present work lies in the fact that, to the best of one's knowledge, no other surveys were carried out on the chosen sample (i.e. the companies listed on the Italian stock market); that only a few international contributions posed the same research question; and most importantly, that the statistical methodology used can very well provide more reliable results than regression analysis, which is normally applied to such data.

Using Option Prices to Infer Overpayments and Synergies in M&amp;A Transactions

In this paper, we use call option prices to identify synergies and news from merger and acquisition (M&A) transaction announcements. We find that M&A announcements result in large and approximately equal gains to the bidder and the target on average, with the combined gains being large enough to justify the premium paid to target shareholders. On average, M&A announcements release good news about targets, but bad news about bidders. This suggests that market prices understate true synergy gains, and helps reconcile the generally negative market-based evidence on value-creation in takeovers with their continued prominence in everyday business strategy.

Horizontal and vertical takeover and sell-off announcements: Abnormal returns differ by industry

We begin with the hypothesis that shareholder-wealth effects of corporate transactions differ depending on (a) the specific industry, (b) whether they are horizontal or vertical, and (c) whether they are integrations (takeovers) or disintegrations (partial sell-offs). A standard event study analysis for cumulative abnormal returns based on the market model is conducted for 309 data-points from 227 transaction announcements. We find that abnormal returns indeed do significantly depend on the transaction profile (horizontal vs. vertical and integration vs. disintegration) and industry. One main result is the observation that the capital market shows distinctive preferences for either an integration or disintegration strategy for vertical as well as for horizontal transactions. The specific pattern of this preference differs according to industry

The wealth effects of real estate transactions: The case of REITs

Recent literature analyzing corporate acquisitions and sales of real estate has shown that statistically significant gains accrue to both buyers and sellers when the transaction is announced. In this paper, we focus solely on the real property transactions of tax-qualified Real Estate Investment Trusts (REITs) to determine if REIT shareholders experience a similar pattern of positive wealth effects. We find that REITs do not experience any significant wealth effects from transaction announcements. However, we provide evidence that a significant positive wealth effect does occur upon the announcement of a sale transaction when the sale is associated with an increase in REIT dividends.

Announcement of Transactions awards 1961-1962

Announcement of Transactions awards 1961-1962

Announcement of Transactions Awards 1960-1961

Announcement of Transactions Awards 1960-1961