This dissertation analyses the cumulative abnormal return (CAR) to Swedish and German bidders and the impact of method of payment. Cash and Stock as means of financing have been discussed widely in the last decades. More recently the contingent payment form earnout has come to focus of research which will be further investigated in this dissertation. The study involves a sample of 927 transactions of which 346 bids are made by German and 581 bids are made by Swedish acquirers. Moreover, the sample compromises 24 German and 49 Swedish earnout deals. The sample period is chosen from 01/01/1986 to 31/12/2012 whereby a German or Swedish company acquires a domestic or foreign target of any listing status. The univariate analysis shows marginally significant results for the outperformance of earnout over non-earnout in cross industry acquisitions (CIAs) and insignificant results for a combination of cash and earnout over cash-only. Furthermore, it provides evidence that earnout deals with a small relative earnout value (REAV) and a short earnout length (EAL) significantly outperform earnout deals with a large REAV and a long EAL. In addition, a multivariate regression is performed to control for the impact of several factors that previously have been found to determine bidder CAR. In conformity with existing studies of the UK and US takeover market, the multivariate analysis provides evidence that earnout currency is a mean to mitigate valuation risk and offers higher value gains to bidder shareholders than non-earnout currency. It further shows that a combination of cash and earnout is a superior means of financing than cash-only payments. Besides, the multivariate analysis supports the univariate results with respect to REAV and EAL and it is shown that earnout measures (EAMs) as profit and sales are important value determinants, which both offer positive and significant value gains to bidder shareholders in earnout deals.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Literature Review
- Problems in Mergers and Acquisitions
- Adverse Selection and Moral Hazard
- Company Specifics
- Implications for the Method of Payment
- Stock and Cash
- Earnout
- Empirical Evidence
- Cash and Stock
- Earnout
- Problems in Mergers and Acquisitions
- Hypothesis Development
- Data and Methodology
- Data Collection
- Sample Description
- Methodology
- Results
- Univariate Analysis
- Multivariate Analysis
- Limitations and Areas of Further Research
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This dissertation explores the use of earnouts as a payment currency in mergers and acquisitions (M&A) transactions. The study specifically examines the impact of earnouts on value gains for bidder shareholders in the German and Swedish M&A markets. The objective is to analyze the relationship between the use of earnouts and the value gains experienced by bidding firms.- The role of earnouts in M&A transactions
- The impact of earnouts on value gains for bidder shareholders
- A comparative analysis of the German and Swedish M&A markets
- The influence of factors such as industry, deal size, and payment method on earnout usage
- The potential benefits and risks associated with earnouts
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter sets the stage for the dissertation by introducing the concept of earnouts in M&A transactions and outlining the research questions and objectives. It also provides an overview of the German and Swedish M&A markets.
- Literature Review: This chapter delves into the existing research on earnouts in M&A transactions, highlighting the challenges and opportunities associated with their use. It explores theoretical perspectives and empirical evidence on the factors influencing earnout implementation and their impact on deal outcomes.
- Hypothesis Development: Building on the literature review, this chapter outlines the hypotheses guiding the study. It examines the expected relationship between the use of earnouts and value gains for bidder shareholders, considering the specific characteristics of the German and Swedish M&A markets.
- Data and Methodology: This chapter provides details about the data collection process and the methodology employed for the analysis. It describes the sample of M&A transactions included in the study and outlines the statistical techniques used to test the hypotheses.
- Results: This chapter presents the findings of the empirical analysis, examining the relationship between the use of earnouts and value gains for bidder shareholders in the German and Swedish M&A markets. It discusses the results of both univariate and multivariate analyses.
Schlüsselwörter (Keywords)
This dissertation focuses on earnouts as a payment currency in M&A transactions, analyzing their impact on value gains for bidder shareholders in the German and Swedish markets. The study employs a comprehensive framework encompassing empirical research, statistical analysis, and a comparative approach to examine the key themes of M&A, earnouts, value gains, bidder shareholders, and the differences in market dynamics between Germany and Sweden. The analysis incorporates industry, deal size, and payment method variables to investigate the nuanced relationship between earnouts and deal outcomes.- Arbeit zitieren
- Silke Schmid (Autor:in), 2013, Earnouts as Payment Currency and Value Gains to Bidder Shareholders., München, GRIN Verlag, https://www.grin.com/document/266470
