Cross-Border Acquisitions and Shareholder Wealth: Evidence from the Energy and Industry in Central and Eastern Europe*

By Bednarczyk, Tomasz P.; Schiereck, Dirk et al. | Journal for East European Management Studies, April 1, 2010 | Go to article overview

Cross-Border Acquisitions and Shareholder Wealth: Evidence from the Energy and Industry in Central and Eastern Europe*


Bednarczyk, Tomasz P., Schiereck, Dirk, Walter, Hardrik N., Journal for East European Management Studies


We look at the wealth generated for shareholders of energy assets in Central and Eastern Europe (CEE) by the announcement of cross-border mergers or acquisitions involving a bidder from a Western industrialized country between 1995 and 2005. The impact on both the performance improvements at the firm level as well as on an industry and economic level of foreign ownership of the energy assets in CEE are discussed. The main driver behind the positive effect is the industrial relatedness in acquiring CEE energy assets, while bidder experience and the relative size of the acquired stake do not impact the results significantly.

Wir betrachten die Werteffekte nach Ankündigungen von grenzüberschreitenden Akquisitionen von Unternehmen der Energiewirtschaft in Mittel- und Osteuropa zwischen 1995 und 2005, bei denen jeweils ein westeuropäischer Bieter einbezogen war. Sowohl der Einfluss auf die Unternehmensperformance als auch auf den ausländischen Anteilsbesitz auf Branchenebene wird diskutiert. Als Haupttreiber des positiven Werteffekts kann die Branchenbeziehung ausgemacht werden, während M&A-Erfahrung und die relative Größe des Kaufobjekts keinen signifikanten Einfluss auf weisen.

Key words: cross-border mergers and acquisitions, capital market integration, corporate control, energy industry

(ProQuest: ... denotes formulae omitted.)

1. Introduction

To further catch up in economic development, Central and Eastern European (CEE) countries had to overcome the bottleneck of energy supply. The relative need for energy in CEE countries was far higher than that in other OECD countries. In 1996, Hungary, for instance, required four and Poland and the Czech Republic eight times as much primary energy production (measured in relation to GDP) as the reunified German economy. A major part of this need could be contributed to the energy sector itself. The economic incentives for efficiency were problematic. Remote from the market priced fuels and largely subsidized electricity tariffs for consumers were conditions which could not sustain in a market-base energy sector (Pesic/Ürge- Vorsatz 2001).

The search for efficiency gains involved substantial privatization programs. Despite the different privatization procedures applied, the CEE countries agreed on selling large stakes in the state-owned enterprises of the energy sector abroad, since it was seen as a strategic infrastructure for future growth, and domestically there was a lack of required capital sources to restructure the industry and to finance necessary capital expenditures. Consequently, there are a lot of utilities in CEE countries which were to a smaller degree privatized via IPOs (Ahnefeld et al. 2008) and then sold partly to exchange-listed Western companies. Beyond the generation of high transaction prices, the privatizations were also motivated by ecological aspects, which were easier to address for foreign acquirers. The local industry was regarded throughout the entire value chain as the largest polluter in CEE countries (Urge- Vorsatz et al. 2003). However, the upgrading process of the energy plants and infrastructure to EU standards and the implementation of ecological improvements took time and instant profits were unlikely (Kavanagh 2002).

Although reform of the energy industry is considered to be one of the major contemporary global industrial challenges (Joskow 1998), the restructuring exigency of the energy industry is particularly severe in CEE countries. The privatization of public utilities in developed Western economies started as early as the 1980s and has been followed by an ongoing consolidation through mergers and acquisitions (M&As). This process has created a few large private oligopolistic (or joint public-private) utility providers with considerable financial strength and geographical reach. When CEE economies started privatization programs in the energy sectors, firms based in Western countries took the opportunity to expand and invest in the newly privatized firms. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • A full archive of books and articles related to this one
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Cross-Border Acquisitions and Shareholder Wealth: Evidence from the Energy and Industry in Central and Eastern Europe*
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.