Evaluating the Performance of Scandinavian Mergers and Acquisitions - Evidence from Divestitures

Abstract

In this thesis, we compile a data set of divestments based on almost 200 mergers and acquisitions in the Scandinavian countries between 2000 and 2011 and then use the data set to assess and classify the long-term success of the original mergers and acquisitions. By the end of 2019, we document that more than 25% of the acquirers had divested the original merger or acquisition. Of these, 31% is considered to be successful divestitures. In the second part of this thesis, we use the findings on long-term success to evaluate market expectations about firm performance at the time of merger and acquisitions announcement. By applying traditional performance measures such as abnormal returns, cumulative abnormal returns, and Tobin's Q, we find that the acquirer’s returns are significantly lower for those firms which subsequently divest and are classified as unsuccessful than for the divestments which we classify as successful and for M&As which are not divested. The overall findings suggest that many of the original mergers and acquisitions should have been avoided in the first place.