Are acquisitions worthwile? An empirical study of the post-acquisition performance of privately held Belgian companies
Ooghe, Hubert Van Laere, Elisabeth De Langhe, Tine
Ooghe, Hubert
Van Laere, Elisabeth
De Langhe, Tine
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Publication Type
Journal article with impact factor
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Supervisor
Publication Year
2006
Journal
Small Business Economics
Book
Publication Volume
27
Publication Issue
2-3
Publication Begin page
223
Publication End page
243
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Abstract
Few studies have addressed the performance of smaller unquoted companies involved in acquisitions, especially in Continental European countries. Therefore this study addresses the post-acquisition financial characteristics of privately held companies involved in 143 Belgian acquisitions between 1992 and 1994. Specifically, this paper examines the financial performance of the acquiring firm after the acquisition, using statistical analysis of industry-adjusted variables. Our findings show that following the acquisition, the profitability, the solvency and the liquidity of most of the combined companies decline. This decline is also reflected in the failure prediction scores. With respect to the added value, acquisitions are found to be accompanied by increases in the labour productivity, but this is caused by the general improvement of gross added value per employee of Belgian companies in the last 10 years. So it seems that, contrary to the general expectations and beliefs, acquisitions usually do not seem to improve the acquirer’s financial performance.
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Keywords
Corporate Finance