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Value Creation within the Construction Industry

A Study of Strategic Takeovers

Series:

Joachim Vogt

Mergers & Acquisitions (M&A) are important strategic business options for corporations. Yet, the understanding of industry-specific drivers of M&A transactions is more than limited. Characterized by highly fragmented markets, cross-company production structures and increasing international business scope, the construction industry represents an attractive field of research to address questions on M&A motives. Based on comprehensively selected datasets and state-of-the-art empirical methods, the study illustrates the motives, the strategy and the effects of M&A transaction within the construction industry. Overall the analyzed M&A transactions tend to lead to an increase of corporate wealth. Important factors for a positive development comprise the peculiarities of the construction industry, the general market conditions and the nature of many takeovers. Still, the M&A transactions may also cause significant value destruction and may even lead to a failure of a company if an inappropriate strategy is applied.

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List of Tables.................................................................................................... XIII List of Figures ................................................................................................... XV List of Abbreviations.......................................................................................XVII List of Symbols ................................................................................................ XIX 1 Introduction ................................................................................................... 1 1.1 Research Overview and Objectives......................................................... 1 1.2 Study One: Objectives and Main Findings ............................................. 3 1.3 Study Two: Objectives and Main Findings............................................. 4 1.4 Study Three: Objectives and Main Findings........................................... 6 2 Consolidation, Value Chain Extension and Outside Industry Investors – Value-Generating M&A Strategies in the Construction Industry................. 7 2.1 Introduction ............................................................................................. 8 2.2 Related Literatures................................................................................. 11 2.3 Data and Methodology .......................................................................... 13 2.3.1 Data and Sample Selection ................................................................ 13 2.3.2 Methodology ...................................................................................... 15 2.4 Empirical Results................................................................................... 16 2.4.1 Overall Sample Analysis.................................................................... 16 2.4.2 Strategic Focuses of Takeovers.......................................................... 19 2.4.3 Domestic and International Takeovers .............................................. 24 2.4.4 M&A Across Decades ....................................................................... 29 X2.5 Success Parameters of Takeovers.......................................................... 31 2.6 Conclusion ............................................................................................. 34 3 Strategic Bidders and Long-Run M&A Success Beyond Monopolistic Power ........................................................................................................... 37 3.1 Introduction ........................................................................................... 38 3.2 Data and Methodology .......................................................................... 42 3.2.1 Data .................................................................................................... 42 3.2.2 Methodology ...................................................................................... 44 3.3 Empirical Results................................................................................... 46 3.3.1 Overall Sample Analysis.................................................................... 46 3.3.2 Strategic Focuses of Takeovers by Construction Firms .................... 48 3.3.3 Detailed Analysis of Takeovers of Non-Construction Firms ............ 51 3.3.4 Domestic and International Takeovers .............................................. 54 3.4 Success Parameters of Takeovers.......................................................... 59 3.5 Conclusion ............................................................................................. 63 4 The Deteriorating Wealth Effect of National Acquisitions in Fragmented and Declining Markets ............................................................ 67 4.1 Introduction ........................................................................................... 68 4.2 Acquirer and Targets ............................................................................. 72 4.2.1 The Acquirer Walter Bau................................................................... 72 4.2.2 Target 1: Concrete Construction Group............................................. 79 4.2.3 Target 2: Heilit Wörner...................................................................... 79 4.2.4 Target 3: DYWIDAG......................................................................... 80 4.2.5 Target 4: Züblin.................................................................................. 81 XI 4.3 Methodology.......................................................................................... 83 4.3.1 Methodology...

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