The Comparative Analysis of Influence of M&A on Financial Performance of the Companies of the USA and Europe
Borodin A.I., Bilchak V.S., Aleshin S.A.
Introduction. The relevance of this study is in a need for a clear understanding of the mergers and acquisitions impact on the companies involved in these processes in modern economic conditions. Does it make economic sense for the management structures of large companies for continuing M&A transactions or it is better to focus on alternative ways of business development? The purpose of this article is to conduct a comparative analysis of changes in selected financial indicators of US and European companies after M&A transactions. The article discusses the impact of M&A transactions on financial performance of American and European companies.
Methods. The paper considers the sample of 138 M&A transactions conducted in these two regions between 2014 and 2018. We investigate the correlation between profit from sales (ROS) and variables such as the ratio of the cost of equity to the value of the enterprise. In addition, we observe the impact of the financial crisis and the industry’s linkage with M&A participants on the efficiency of the combined company.
Results and Discussion. Most of the corporations studied both in the USA and in Europe were profitable and remained so after mergers and acquisitions. However, despite the fact that there are positive values of the studied variables, tests for the analysis of average values in the sample show a significant deterioration in ROS in both regions. At the same time, in the USA the change in the EBIT/Total Revenue ratio averaged –6.8 %, and in the European countries –5.3 %. Regression analysis did not reveal a significant relationship between mergers and acquisitions and company performance indicators, and the difference in values by region can be interpreted by the fact that the US entered the crisis earlier. The significance level and the sign with the EVEQ coefficient indicate that (ceteris paribus) an increase in the “attractiveness” of target companies leads to an increase in ROS.
Conclusion. The results do not indicate any particular impact of M&A on post-M&A performance in the considered companies.
KeywordsCorporate finance, financial performance, mergers and acquisitions, M&A transactions, ROS, USA, European companies
Information about the authors
Alex I. Borodin, Dr.Sci. (Economics), Professor, Plekhanov Russian University of Economics (36 Stremyannyy per., Moscow 117997, Russia), ODCID: https://orcid.org/0000-0002-2872-1008. His research interests include budgeting and financial planning, economics in industry, accounting, information technology, finance, regional economics, environmental economics, labor economics.
Vasily S. Bilchak, Dr.Sci. (Economics), Professor of Department of Microeconomics, University of Warmia and Mazury (3 R. Pravokhenskego St., Olsztyn 10-720, Poland), ORCID: https://orcid.org/0000-0002-8112-2389. His research interests include cross-border cooperation, border regions, regional economics, border economics.
Sergey A. Aleshin, Graduate of the World Economy and World Politics Faculty, National Research University Higher School of Economics (26 Shabolovka St, Moscow 119049, Russia).
- Borodin A. I. – data analysis, literature review, formulation of the conclusions;
- Bilchak V. S. – analysis of indicators of corporations in the Europe and the USA;
- Aleshin S. A. – data analysis, making the tables and illustrations.