Does the Merger-Related Legislation in the Nation of the M&A Target Company Affect the Probability of the Pre-Merger Deal Failure?

Logit model Mediator and Moderator Analysis

Diploma Thesis , 2016 , 55 Pages , Grade: 1.5

Business economics - Business Management, Corporate Governance

The paper examines the relationship between the nation of an M&A transaction’s target company and the probability of deal completion/ pre-merger failure based on a sample of transactions proposed by Dutch bidders during the period ranging from 2003 to 2015 with other Dutch companies; British (UK); or American (US) targets. By the logistic regression analysis, the US-targeted deals were found to be associated with higher probabilities of pre-merger failure which is aimed to be explained by applying a mediation analysis of several country-specific indicators potentially affecting the deal completion. This way, four factors which are addressed in the theoretical part of the paper (including the restrictiveness of the merger control mechanisms, effectiveness of corporate-related legislation and the time and complexity of contract enforcement) were found to be the mediators of the relationship between the target nation and pre-merger failure. Additionally, according to the regression results, transactions conducted during the end of a merger wave are expected to be less likely completed than the ones
negotiated in the earlier or later stages, regardless of the target nation.

Inhaltsverzeichnis (Table of Contents)

• 1 Introduction
• 2 Literature Review
• 3 Merger Regulation
  • 3.1 Antitrust Laws in the USA
    • 3.1.1 The Sherman Act
    • 3.1.2 The Federal Trade Commission Act
    • 3.1.3 The Clayton Act
    • 3.1.4 Federal Trade Commission Cases and Proceedings
  • 3.2 Merger Regulation in the EU
    • 3.2.1 Criteria for the EU Merger Regulation to Apply
    • 3.2.2 The EU Merger Regulation Notification, Investigation and Penalties
    • 3.2.3 The EU Merger Regulation Statistics
  • 3.3 Comparison of the EU and US Merger Control Mechanisms
• 4 Takeover Defense Tactics
  • 4.1 Dual-class Shares
  • 4.2 ESOP
  • 4.3 Poison Pills
  • 4.4 Golden Parachute
  • 4.5 Staggered Board Amendments
  • 4.6 Greenmail
  • 4.7 Comparison of the US, UK and Dutch Defense Tactics
• 5 Hypotheses Formulation
• 6 Logit Model Analysis
  • 6.1 Methodology
    • 6.1.1 Basic Assumptions of the Logit Model.
  • 6.2 Data Structure and Model Variables
    • 6.2.1 The Dependent and Independent Variables
    • 6.2.2 The Mediator Variables
    • 6.2.3 The Moderator Variable
    • 6.2.4 Descriptive Statistics
  • 6.3 Logistic Regression Analysis
    • 6.3.1 Hypothesis Testing
• 7 Robustness Test: Probit Model Analysis

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This paper investigates the relationship between the nationality of a target company in a merger and acquisition (M&A) transaction and the probability of the deal failing before completion. The study focuses on transactions initiated by Dutch bidders between 2003 and 2015, targeting Dutch, British, and American companies. The main objective is to determine whether the target company's nation influences the likelihood of a pre-merger deal failure.

• Impact of National Context on M&A Deal Success
• Merger Control Regulations and their Influence on Deal Completion
• Takeover Defense Tactics and their Role in Deal Failure
• Country-Specific Indicators as Mediators of Deal Success
• The Role of Merger Waves in Deal Completion Probabilities

Zusammenfassung der Kapitel (Chapter Summaries)

Chapter 1 introduces the research topic and provides a brief overview of the study's scope and methodology. Chapter 2 reviews relevant literature on M&A transactions, focusing on factors that influence deal success and failure. Chapter 3 delves into merger regulation in the United States and the European Union, analyzing the key provisions and comparing their impact on M&A transactions. Chapter 4 explores various takeover defense tactics employed by target companies, examining their effectiveness in preventing hostile takeovers. Chapter 5 formulates hypotheses based on the literature review and the theoretical framework developed in previous chapters. Chapter 6 presents the logit model analysis, outlining the methodology, data structure, and results of the regression analysis. Chapter 7 conducts a robustness test using a probit model to validate the findings obtained from the logit model.

Schlüsselwörter (Keywords)

The key focus of this research lies on understanding the relationship between the national context of an M&A target company and the likelihood of a deal failing before completion. This study examines the impact of merger control mechanisms, takeover defense tactics, and country-specific indicators on deal success. Key terms include merger control, deal completion, pre-merger failure, takeover defense, country-specific indicators, and logistic regression analysis.

• College: Utrecht University
• Course: International Management
• Grade: 1.5
• Author: Bc Marek Čech (Author)
• Publication Year: 2016
• Pages: 55
• Catalog Number: V342294
• ISBN (eBook): 9783668322912
• ISBN (Book): 9783668322929
• Language: English
• Tags: merger, acquisition, M&A, failure, deal, logit model, moderator and mediator