Journal of Economics and Finance

, Volume 34, Issue 1, pp 61–88

The long-term success of M&A in the automotive supply industry: determinants of capital market performance

Authors

    • European Business School
  • Dirk Schiereck
    • Unternehmensfinanzierung/Corporate FinanceTechnische Universität Darmstadt
Article

DOI: 10.1007/s12197-008-9065-z

Cite this article as:
Laabs, J. & Schiereck, D. J Econ Finance (2010) 34: 61. doi:10.1007/s12197-008-9065-z

Abstract

In the recent past, the automotive supply industry has been facing increasing merger activity. This paper examines the short- and long-term wealth effects of horizontal mergers and acquisitions on acquirers in the automotive supply industry. Based on a sample of 230 takeover announcements between 1981 and 2007, significant positive announcement returns to acquiring companies were determined. While these positive short-term returns to acquirers represent an outstanding attribute of this industry in terms of perceived synergy potential, this study also finds that acquirers are unable to sustain this exceptional position beyond a short-term horizon. A combination of the Fama-French-3-Factor model in calendar time and the control firm approach in event time consistently reveals significant value destruction of about 20% over 3years. In addition, the study determines a significant impact of internationalization, transaction volume, product diversification, and acquirer’s bidding experience on the long-term post-acquisition performance.

Keywords

Automotive Supply Industry Mergers and Acquisitions Long-Term Event-Study Market Efficiency Announcement Returns

JEL Codes

G14 G34 L41 L62 C21

Copyright information

© Springer Science+Business Media, LLC 2008