|
The
Effects of the Cross-Correlation of Stock Returns on Post-Merger
Stock Performance
--
Antonios
Antoniou,
Philippe Arbour and Huainan Zhao
This
paper examines the effects of the cross-correlation of stock
returns on the long-run post-merger stock performance of
UK acquiring firms over the period 1985-2001. In general,
it is found that the widely documented anomaly of long-run
underperformance following mergers is not due to various
stylized merger effects but rather due to the cross-correlation
of stock returns, which compromises the `independence of
observations' assumption, thus yielding overstated test
statistics. The paper in particular tests the method of
payment, diversification, book-to-market, and size effects
in mergers. It is found that these documented long-run effects
simply disappear after accounting for the cross-sectional
dependence of sample returns. The results highlight the
importance of controlling for the cross-correlation of stock
returns in long-run, post-merger event studies.
©
2008 IUP . All Rights Reserved.
Combined
in Luxury: M&A Announcement Effects and Capital Market
Integration in Europe
--
Anke
Königs and Dirk Schiereck
Parallel
to the development towards European harmonization including
the aim of an integrated European capital market, the luxury
industry has experienced profound structural changes. No
other internationally operating industry might be similarly
dominated by European companiesreferring to the European
majority among the listed luxury firms, and especially considering
the four predominant Europe-headquartered luxury conglomerates.
Owing to the expansion strategy of these conglomerates and
the overall consolidation trend throughout the luxury industry,
numerous Mergers and Acquisitions (M&A) involving luxury
firms have taken place. Against the background of an increasing
international orientation combined with the sector superiority
of European luxury companies, the paper considers luxury
M&A to be an appropriate object of investigation concerning
the degree of European capital market integration. This
study examines the announcement effects of 206 M&A involving
luxury companies from 1993-2005. The main results comprise
three aspectsprimarily, there are no significant differences
in the announcement returns between domestic and cross-border
luxury transactionsindicating a high degree of European
financial market integration. Moreover, the paper finds
significantly positive M&A announcement effects for
shareholders of both luxury targets and acquirers. The abnormal
returns accruing to target shareholders exceed the ones
attributed to acquirer shareholders. Finally, contrasting
M&A operations of acquiring luxury conglomerates and
non-conglomerate luxury companies reveal that only acquisitions
by non-conglomerate luxury firms are associated with significantly
positive wealth effects differing significantly from the
conglomerate sub-sample.
©
2008 IUP . All Rights Reserved.
Case
Study
United
Brewery's Acquisition of Whyte&Mackay: the Potential
Synergies
-- Vartika Gupta
On
May 16, 2007 India's United Brewery (UB) Group, the world's
third-largest maker of spirits, acquired Whyte and Mackay
(W&M) Ltd., a Scotch Whisky making company in the Scotland,
with $281 mn turnover, for £595 mn (US$1.2 bn). The
synergies from the acquisition are expected to benefit both
the companies. This acquisition is going to be one among
the largest outbound acquisition by an Indian Company and
it will make the UB Group a global player. Since Scotch
has growing world wide demand, the UB Group intends to grow
their business aggressively with the help of this acquisition.
At the same time, the value offered by the UB Group does
not seem cheap; however, UB Group has concentrated only
on the inventory and brand image of W&M. The case study
also highlights about the national and international market
and the demand for scotch. It discusses the various facets
of the acquisition.
©
2008 IUP . All Rights Reserved.
| 
