The Creation of Value for Shareholders in Tender Offers : An Empirical Investigation on the Italian Stock Market

The economic and monetary unification, the globalization of markets and the increasing use of new Information and Communication Technologies (ICT) have increased the level of competition in all sectors of the economy by opening the way to processes of Mergers and Acquisitions between companies. In the period of 1990-2006, there were 6,097 acquisitions of corporate control involving the listed companies and the unlisted companies, 10% of which involved the banking sector. From the 1992 regulation up to 2006, the Antitrust Authority has registered 5,995 takeovers, with an increase of 188.1% in the period of 1994-2006. The objective of this work is to investigate the creation of value for shareholders both in tender offers (Offerta Pubblica di Acquisto — OPA) which provide the change of corporate control, and in residual transactions. In this regard, 202 operations involving 45 bidders and 181 targets during the period of 1994-2006 have been examined by using the event study methodology. The cumulative abnormal returns in the changes of corporate control, within 20 days of the announcement date, seem to suggest the creation of value for the target companies (CARt 7.39%) and a destruction of value for the bidders (CARb - 3.85%). An analysis of the combined values, however, reveals that these overall operations do not create value (CCARs - 0.56%). In conclusion, these transactions, rather than creating value, produce the transfer of value by the shareholders of the bidder companies to those of the target companies, which ultimately results in a “zero sum”