Table Of ContentLocation Strategies and Value Creation of
International Mergers and Acquisitions
Series Editor
Paul-Jacques Lehmann
Location Strategies
and Value Creation of
International Mergers
and Acquisitions
Ludivine Chalençon
First published 2017 in Great Britain and the United States by ISTE Ltd and John Wiley & Sons, Inc.
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Contents
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
General Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Part 1. Location and Performance
of Mergers and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction to Part 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Chapter 1. Characteristics and Location
of Mergers and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.1. Modes of conduct of mergers
and acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.1.1. The characteristics of mergers
and acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.1.2. Mergers and acquisitions as modes
of entry on foreign markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.2. International development by means
of mergers and acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.2.1. Geographic distance and
economic growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
1.2.2. Quality of institutions and
cultural differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
1.3. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
vi Location Strategies and Value Creation of International Mergers and Acquisitions
Chapter 2. Analysis of the Performance
of Mergers and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . 49
2.1. Theoretical perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.1.1. The perspective of industrial economy . . . . . . . . . . . . . . . . . 50
2.1.2. The perspectives of informational
efficiency and organizational finance . . . . . . . . . . . . . . . . . . . . . . 57
2.2. Performance of mergers and acquisitions . . . . . . . . . . . . . . . . . . 68
2.2.1. Measuring the performance
of mergers and acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
2.2.2. Value creation factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
2.3. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Conclusion to Part 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Part 2. Methodology of the Empirical Study . . . . . . . . . . . . . . . . 105
Introduction to Part 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Chapter 3. Research Methodology . . . . . . . . . . . . . . . . . . . . . . 109
3.1. Methodological choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
3.1.1. Epistemological stance . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
3.1.2. Event studies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
3.2. Statistical analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
3.2.1. Simple and multiple linear regressions . . . . . . . . . . . . . . . . . 140
3.2.2. Logistic regressions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
3.3. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Chapter 4. Presentation of the Empirical Study . . . . . . . . . . . . . 153
4.1. The constitution of the sample . . . . . . . . . . . . . . . . . . . . . . . . . 154
4.1.1. The selection of the sample contents . . . . . . . . . . . . . . . . . . 154
4.1.2. Data collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
4.2. Descriptive analysis of the sample . . . . . . . . . . . . . . . . . . . . . . 171
4.2.1. The main sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
4.2.2. A focus on “clustered” announcements . . . . . . . . . . . . . . . . . 193
4.3. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Conclusion to Part 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Contents vii
Part 3. Location and Value Creation
of Mergers and Acquisitions
by French Acquirers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Introduction to Part 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
Chapter 5. Determinants of Location
of Mergers and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . 203
5.1. Geographic distance and economic growth . . . . . . . . . . . . . . . . . 207
5.1.1. The impact of geographic distance . . . . . . . . . . . . . . . . . . . . 208
5.1.2. The role of economic growth . . . . . . . . . . . . . . . . . . . . . . . 212
5.2. The quality of institutions and cultural differences . . . . . . . . . . . . 216
5.2.1. The influence of the quality of institutions . . . . . . . . . . . . . . . 216
5.2.2. The impact of cultural differences . . . . . . . . . . . . . . . . . . . . 220
5.2.3. The global research model . . . . . . . . . . . . . . . . . . . . . . . . 224
5.3. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Chapter 6. Determinants of Value
Creation of Mergers and Acquisitions . . . . . . . . . . . . . . . . . . . 231
6.1. Value creation and acquirer focus. . . . . . . . . . . . . . . . . . . . . . . 232
6.1.1. The analysis of the reaction of financial markets . . . . . . . . . . . 232
6.1.2. Characteristics of the acquirer . . . . . . . . . . . . . . . . . . . . . . 244
6.2. Target focus and operation . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
6.2.1. Characteristics of the target . . . . . . . . . . . . . . . . . . . . . . . . 258
6.2.2. Characteristics of the operation . . . . . . . . . . . . . . . . . . . . . . 277
6.3. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292
Conclusion to Part 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297
General Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299
Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315
Appendix 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317
Appendix 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319
viii Location Strategies and Value Creation of International Mergers and Acquisitions
Appendix 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321
Appendix 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323
Appendix 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325
Appendix 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327
Appendix 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329
Appendix 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363
Acknowledgments
I wish to express my most sincere gratitude to, first and foremost, my
PhD supervisors Professors Alain Marion and Ulrike Mayrhofer. They have
been great guides, helping me progress along this doctoral process, which
finds its accomplishment in this book. Their support, availability and
goodwill have been fundamental for me to achieve this work.
I also wish to thank Professors Isabelle Martinez, Patrick Sentis and
Philippe Very for their comments and advice during this research. I feel
honored by the interest they have shown in my work.
My gratitude also goes to Professor Tao-Hsien Dolly King from the
University of Charlotte (USA) as well as to Professors Diane-Gabrielle
Tremblay, Jean-Yves Filbien and Diego Amaya from the University of
Quebec (Canada) for welcoming me at their work place and advising me in
the progress of my research.
I warmly thank all the professors and doctorate students of the Magellan
Research Center of the IAE Lyon (France). Their comments and remarks
guided me throughout the various stages of this work, from the onset of the
research project to the successive choices that resulted in the publication of
this work.
Last but not least, I heartfully thank my spouse, parents, family and
friends who listened, probably more often than reasonable, to me telling
them about my research. I wish to especially thank Anne-Joëlle, Caroline
and Aurélien who spent long hours proofreading my chapters. Many thanks
to you all.
General Introduction
“One needs two legs to walk. Globalization encourages us to search beyond
our borders, but one also needs to strengthen one’s capacity at home, on
one’s historical market sectors”.
Paul HERMELIN, Chief Executive Officer, Capgemini
(Les Echos, April 5, 2011)
“Acquisitions constitute an essential axis of the profitability growth plan of
Rexel and we will keep investing in emerging markets as well as in mature
markets”.
Rudy PROVOOST, Chairman of the Board of Rexel
(Activity Report, 2012, p. 16)
“Today, our ambition is to become a global leader, balancing emerging
economies and mature economies, innovation potential and growth
potential”.
Bruno LAFONT, Chief executive Officer of Lafarge
(Les Echos, May 7, 2014)
These quotes from economic and finance journals highlight how
important it is for the performance of companies to develop internationally,
especially via means of mergers and acquisitions.
Mergers and acquisitions activity is characterized, timewise, by waves of
increased activity. The last of such waves peaked in 2007 to recede with the
economic crisis of 2008. To date, 2007 is the year during which the largest
xii Location Strategies and Value Creation of International Mergers and Acquisitions
number of operations occurred, for a total sum of 4,130 billion dollars
[THO 14]. Although the economic context can explain the relative
slowdown of external growth operations of companies, their activity remains
high and the public announcements of 2014 suggest a new wave may be
forming. French companies are particularly active as they account for 4% of
the total number and value of operations completed globally. They,
therefore, reach the third rank, just after the American and British companies
(ranking established on the basis of the information available in the
databases of Securities Data Company (SDC) Platinium on Line, from 1990
to June 2014). During the first 6 months of 2014, the French market
displayed a strong growth, registering operations that sum up to a value of
107.7 billion euros. This sum is four times greater than that of the first
semester of 2013 (an article in Thomson Reuters, published on July 1, 2014).
Moreover, the study of merger and acquisition dynamics shows an
increase in the number of operations involving different nationalities. For
example, such operations haves increased by 53% in 2011 [CNU 14].
Furthermore, companies from emerging countries account for an increasing
part in merger and acquisition activity. The fraction of operations completed
in these countries shows a clear growth in volume, contrary to these in
mature countries: from only 6% in 1990, they rose to 24% in 2011 and even
to 26% in 2013 [CUN 14].
This significant recourse to external growth strategies can be explained
by the fact that such strategies enable a company to meet various objectives
in a limited amount of time [SLA 08]. The literature, however, often
highlights the risks carried by such operations. Since they have multiple
characteristics and motivations, they are very complex in a financial,
strategic, as well as a human perspective. Most studies about the relevance
of such acquisitions report a lowering of the performance of company or, at
best, a stagnation after the merger and acquisition operation [AGR 92,
DEV 09]. In the same vein, authors estimate that the rate of failure of such
acquisitions can reach above 50% [VAZ 12]. However, these works also
showed that, although the profitability of abnormal acquisitions is effectively
low, null or even negative for the buyer, they are strongly positive for the
target when the acquisition is announced [MOE 05].
Globalization created new opportunities as well as new constraints
regarding the expansion of companies, as their location can be a source of
competitive advantage [GOE 10]. Indeed, companies must adjust their
