Value Creation and Division of Gains in European Horizontal Acquisitions: The Role of Industry Conditions

This paper empirically investigates the industry determinants of M&A value creation and the division of M&A gains in a sample of horizontal acquisitions in Europe during the period 19972008. Our results show that industry sales concentration and the ratio of combined target and bidder size relative to the minimum efficient scale in the corresponding industry are significantly negatively associated with shareholder abnormal returns at deal announcement. The relation between industry sales growth and M&A value creation is U-shaped. Industry technological intensity and industry deregulation bear no significant association with M&A value creation, however. Finally, the data reveal that the division of M&A gains between target and bidder investors is determined by firm and deal characteristics rather than by industry conditions.