The operational effects of mergers and acquisitions within the European Union

This paper examines the operating performance of mergers and acquisitions within the European Union. The data is collected from the period 2009 until 2015 and consists of 1484 deals. All of the eight accounting-based measures that are examined in this paper use EBITDA as proxy to examine the operating performance. It is corrected for both changes in working capital and industry effects. For comparison across deals, the measure is deflated by assets or revenue. Classic and newly introduced determinants are checked for influence on the post-event operating performance. These are: cross-border effect, experience of the acquirer effects, industry relatedness, method of payment, relative size, leverage of the acquirer, and the cash position of the acquirer. The experience of the acquirer within M&A and the pre-event operating performance has positive significant effects on the post-event operating performance. The relative size of the target has a significant negative effect. The research concludes, based on the preferred operating measure, that there is a positive relation of a merger or acquisition on the operating performance of the firm. This effect is significant at the 5% level. The change in operating performance was significantly negative for the all models that did not take the change in working capital into account. All other change models show no significant effect. Comparing the change model with the OLS model, based on the preferred operating measure. There is still a positive effect of merger and acquisitions on the operating performance of the firm, while controlled for the named variables. This effect is however not significant. This means that there is no statistical significant reason to conclude that the operating performance of the combined firm after a merger or acquisition differs significantly from the situation before the merger or acquisition, when controlled for the named determinants/variables.