The Long-Term Success of Mergers and Acquisitions in the International Automotive Supply Industry

212 Pages·2009·1.57 MB·English

by  Jan-Peer Laabs

Jan-Peer Laabs
The Long-Term Success of Mergers and Acquisitions
in the International Automotive Supply Industry
GABLER EDITION WISSENSCHAFT
EBS Forschung
Schriftenreihe der European Business School (EBS)
International University · Schloss Reichartshausen
Herausgegeben von
Univ.-Prof. Ansgar Richter, PhD
Band 71
Die European Business School (EBS) – gegründet im Jahr 1971 –
ist Deutschlands älteste private Wissenschaftliche Hochschule für
Betriebswirtschaftslehre im Universitätsrang. Dieser Vorreiterrolle
fühlen sich ihre Professoren und Doktoranden in Forschung und Lehre
verpflichtet. Mit der Schriftenreihe präsentiert die European Business
School (EBS) ausgewählte Ergebnisse ihrer betriebs- und volkswirt-
schaftlichen Forschung.
Jan-Peer Laabs
The Long-Term Success of
Mergers and Acquisitions
in the International
Automotive Supply Industry
With a foreword by Prof. Dr. Dirk Schiereck
GABLER EDITION WISSENSCHAFT
Bibliographic information published by the Deutsche Nationalbibliothek
The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie;
detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.
Dissertation European Business School, International University Schloss Reichartshausen,
Oestrich-Winkel, 2009
D1540
1st Edition 2009
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Foreword
It is precisely the kind of highly variable success that Schaeffler KG was forced
to endure during its acquisitions of FAG Kugelfischer and Continental, which provides
a telling account of the myriad potential consequences of mergers and acquisitions in
the automotive supply industry. The global competitive landscape for automotive sup-
pliers is wholly unique, and not just because its consumers and key customers, the
automotive manufacturers, have joined together in an ever-narrowing oligopoly over the
last twenty years, nor because the current focus on suppliers is already helping restore
an increasingly stable balance of power.
Since automotive manufacturers serve international markets, the competitive
environment for suppliers has also always been transnational. This becomes all the more
relevant when we consider recent shifts in the automotive manufacturing value chain.
Meanwhile, some suppliers are producing a higher value contribution during construc-
tion of a car than the actual manufacturer. In these situations, international M&A trans-
actions seem especially attractive, and should, in actual fact, generate positive reactions
on the capital markets. But is that really the case? Studies looking specifically into the
long-term success of international M&A transactions have been a rare commodity until
now, the current state of knowledge on the success of acquisitions in the automotive
supplier industry is even more limited, and the transferability of evidence based on ex-
periences in other sectors is highly questionable. There was, therefore, an urgent need to
analyze the success factors for M&A in this industry
This paper seizes on this considerable research gap, with great attention to detail
and maximum possible accuracy. The primary objective was to use capital market data
and financial accounting information to investigate the success of international M&A
transactions in the automotive supply industry, and to identify the key factors in this
success. Thus can we achieve an objective state of knowledge, which can be used as a
VI Foreword

basis for deriving well-founded, recommended actions to be implemented in industry
practice.
Mr. Laabs is in the best possible position to fulfill his self-imposed objectives in
terms of this dissertation. The paper contains a wealth of very interesting results, and is
written in such a way that the reader will thoroughly enjoy studying this entire work
from cover to cover. I wish this paper the extensive circulation it deserves.

Professor Dr. Dirk Schiereck
Preface
Writing the following doctoral thesis has been an inspiring and shaping personal
experience. However, the progress of my research would not have been as advanced,
focused, and exciting without the support of many people whom I would like to ac-
knowledge and thank with the following lines. They made a successful completion of
my work possible.
First, I would like thank my doctoral supervisor, Prof. Dr. Dirk Schiereck, for
his academic guidance and encouragement in preparing this thesis. Besides providing
valuable advice and instant feedback, he always managed to balance academic "judg-
ment calls" with an extraordinarily constructive and collaborative working atmosphere.
I appreciated the discussions and will remember our joint journey to an academic con-
ference in Nashville as one of the highlights of these past two years. In addition, I
would like to thank Prof. Dr. Ronald Gleich for readily agreeing to assume the role of
secondary advisor to my thesis. His strategic perspective on the implications of my
work represented an enriching addition to my finance-driven research approach.
Second, I am thankful for the support of a number of friends and colleagues.
First and foremost, I would like to acknowledge the exceptional help and support of my
friend Nils Steiner. Besides being an inspirational discussion partner, he contributed
significantly with his technical and modeling experience. Without his "hands-on" prac-
tical advice, some of my calculations might have taken considerably longer, or even,
would not have found their way into the final version of this thesis. In addition, I would
like to thank my colleagues and friends from the Frankfurt Office "Fellow Community"
for the joint times we shared, both by discussing on or off topic or by playing numerous
rounds of table soccer. All other friends I would like to thank for spurring my motiva-
tion by continuously asking for my work's progress. This book is the answer to these
questions.
VIII Preface

Last, but definitely not least, I would like to thank my family and, in particular,
my parents. Their unconditional support and encouraging mindset gave me the freedom
I needed to pursue my goals and the certainty of their helping advice and opinion when
required. Finally, I am especially grateful to my long-time girl-friend Nadine and our
daughter Lina-Marie. They not only managed to cope with the additional time con-
straints inherent in writing a doctoral thesis, but also seemed to outbalance any upcom-
ing doubts on my side with an increased level of encouragement and support. Their
support, patience, and love have been invaluable sources of inspiration and motivation
to finish this thesis. I dedicate this book to them.

Jan-Peer Laabs
Content Overview
List of Figures................................................................................................................XV
List of Tables..............................................................................................................XVII
List of Abbreviations...................................................................................................XIX
1 Introduction..............................................................................................................1
2 Research Foundations...............................................................................................9
3 Study 1: Determinants of Capital Market Performance.........................................23
4 Study 2: Does Operating Performance Meet Market Expectations?......................93
5 Study 3: How a Good Bidder Becomes a Good Target – The Case of
Continental AG Acquiring Siemens VDO...........................................................133
6 Conclusion............................................................................................................173
Appendix......................................................................................................................181
References....................................................................................................................189
Table of Contents
List of Figures................................................................................................................XV
List of Tables..............................................................................................................XVII
List of Abbreviations...................................................................................................XIX
1 Introduction..............................................................................................................1
1.1 Problem Definition and Objectives..................................................................1
1.2 Course of Analysis...........................................................................................5
2 Research Foundations...............................................................................................9
2.1 The Automotive Supply Industry.....................................................................9
2.1.1 Definition and Scope............................................................................9
2.1.2 Current Trends and Challenges..........................................................10
2.2 Mergers and Acquisitions...............................................................................15
2.3 Measuring Success of Mergers and Acquisitions...........................................16
2.3.1 Time Horizons....................................................................................16
2.3.2 Research Approaches.........................................................................19
3 Study 1: Determinants of Capital Market Performance.........................................23
3.1 Introduction....................................................................................................23
3.2 Literature Review and Hypotheses.................................................................25
3.2.1 Related Literature...............................................................................25
3.2.2 Hypotheses.........................................................................................29
3.2.2.1 The Overall Effect...............................................................29
3.2.2.2 The Impact of Transaction Characteristics..........................29
3.2.2.3 The Impact of Acquirer Characteristics...............................31
3.3 Data and Methodology...................................................................................33
3.3.1 Identifying Merging Companies.........................................................33
3.3.2 Portfolio of Matching Firms...............................................................35
3.3.3 Econometric Strategy.........................................................................36
3.3.3.1 Short-term Methodology.....................................................36
3.3.3.2 Long-term Methodology......................................................40
3.4 Empirical Results............................................................................................43
3.4.1 The Overall Effect..............................................................................43
3.4.2 The Impact of Transaction Characteristics.........................................47
3.4.2.1 Geographical Expansion......................................................47