Academic journal article E+M Ekonomie a Management

Cross-Border Acquisitions in Central and Eastern Europe with Focus on Russia versus Germany Deals: An Empirical Analysis

Academic journal article E+M Ekonomie a Management

Cross-Border Acquisitions in Central and Eastern Europe with Focus on Russia versus Germany Deals: An Empirical Analysis

Article excerpt

Introduction

Cross-border mergers and acquisitions (M&As) have gained popularity over the last two decades (Erel, Liao, & Weisbach, 2012). They have become a dominant form of foreign direct investment in world economy (Zhu, 2011). Research on this type of expansion strategy, however, has not kept pace with this trend and it is highly fragmented, leaving gaps that need to be addressed (Collins et al., 2009). The area of cross-border acquisitions in Central and Eastern Europe, which is also of interest in this paper, represents such a gap.

The progress of globalization positively influenced the worldwide acquisition and merging activities of companies. However, there are some facts and trends in the world economy that highlight the importance and specificity of M&As in Central and Eastern Europe. These facts and trends hang especially with the development after 1993, when a vast number of mergers were followed by an unprecedented increase of worldwide transactions. To some extent, this development was caused by changes of the political landscape in Europe and the relationships among European countries. Because of fall of the "iron curtain", the proceeds of European integration, mainly the European single market, have created new possibilities. As a result, companies have been forced to develop and implement new expansion strategies. Motivated by the promise of value creation for their shareholders, multinational corporations have begun to use cross-border M&As as an important tool to acquire key resources and gain market entry to Central and Eastern European markets (Zhu, 2011; Gavurova, Vagasova, & Kovac, 2016).

As understanding the problem and opportunities of cross-border acquisitions in Central and Eastern Europe is the essential element in understanding the nature of the up-to-date global expansion strategy of a company from an emerging market connected to the EU, the main aim of this paper is to analyze announced and completed cross-border acquisitions between a public listed acquirer and target companies from Central and Eastern Europe concentrating on the associated reactions of the capital markets. The empirical analysis focuses on companies from Russia and Germany as dominant acquirers in this context (Statista, 2018).

Taking into account the above, following hypotheses are tested in this paper:

Hypothesis 1: Capital market believes that the effects of the investments realized in the form of cross-border acquisitions in Central and Eastern European markets are positive.

Hypothesis 2: Russian market is better in the area of cross-border acquisitions than remaining Central and Eastern European markets.

Analysis results indicate that Central and Eastern Europe are very attractive from market's perspective due to the expected growth rates and the framework conditions as well as from the perspective of Western European investors, and that the Russian market is better in the area of cross-border acquisitions than remaining Central and Eastern European markets. Analysis results also show that effects of investments realized in form of cross-border acquisitions in Central and Eastern Europe are positive, and changes in stock prices are statistically significant. These findings provide some support to the synergistic and investment opportunity arguments of M&As in emerging markets asserted by Chari, Ouimet, and Tesar (2004).

The remainder of this paper proceeds as follows. Section 1 provides the review of relevant literature. Section 2 explains the main motives for cross-border M&As in Central and Eastern Europe. Section 3 describes the sample and the research methodology. Section 4 presents the results, and Section 5 summarizes and concludes it all.

1. Literature Review

The progress of globalization (Hitt et al., 1998; Hitt, Keats, & DeMarie, 1998), related increased economic integration (Bjorvatn, 2004) and liberalization of international trade (Hijzen, Goro, & Manchin, 2008), together with accelerated development of technology (Conklin, 2005) positively influenced the worldwide acquisition and merging activities of companies. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.