Are acquisitions worthwile? An empirical study of the post-acquisition performance of privately held Belgian companies involved in take-overs
De Langhe, Tine Ooghe, Hubert
De Langhe, Tine
Ooghe, Hubert
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Publication Type
Working paper
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Supervisor
Publication Year
2001
Journal
Book
Publication Volume
Publication Issue
12
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Publication NUmber of pages
49
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Abstract
Few studies have addressed the performance of smaller unquoted companies involved in take-overs, especially in the Continental European countries. Therefore this study addresses the post-take-over financial characteristics of privately held companies involved in 143 Belgian take-overs between 1992 and 1994. Specifically, this paper examines the financial performance of the acquiring firm after the take-over, using statistical analysis of industry-adjusted variables. Our findings show that following the take-over, 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, take-overs are found to be accompanied by increases in the labour productivity, caused by the general improvement of gross added value per employee of Belgian companies in the last ten years and partly caused by laying off the target's workers. So it seems that, contrary to the general expectations and beliefs, take-overs usually do not seem to improve the acquirer's financial performance.
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Corporate Finance