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Value Creation of Corporate Restructuring

A Market Cycle and Industry View


Ulrich Erxleben

The study offers a contribution to the debate about shareholder wealth creation following corporate restructuring transactions. Including market cycle and industry factors, it provides an analysis of merger and acquisition (M&A) and corporate divestiture success between 1989 and 2008 in Europe. The first part of the study focuses on effects of market valuation levels and market cycles on the value creation potential of corporate restructuring. The second part discusses mergers and acquisitions and divestment success from an industry perspective. The results provide surprising insights into drivers of shareholder value creation.
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2. Corporate Restructuring in Europe - Starting Point and Motivation


2.  Corporate Restructuring in Europe – Starting Point and Motivation

The following initial analysis of European corporate restructuring over time and across industries is the starting point of this thesis and establishes the foundation of the research interest underlying the in-depth examination in Chapters 4 to 7. The motivation to conduct an analysis of corporate restructuring from a market cycle as well as from an industry perspective is based on the intuition that not only corporate restructuring activity but also value creation differs across time periods and industries. To further examine this intuition, an analysis of activity levels and short-term announcement returns (CAR) is conducted for M&A and corporate divestiture in Europe over the last 20 years.

The results confirm that large variations in M&A activity and success exist with regard to transaction timing and acquirer industry. The remainder of this chapter presents the results of these initial observations. Chapters 4 to 7 then provide examinations of determinants for the observed variations.

2.1  Corporate restructuring in Europe between 1998 and 2009

The two decades between 1989 and 2009 were the most active years in history in terms of corporate restructuring transaction number and value. Within these years, activity has strongly clustered. This applies for M&A as well as for divestment activity. Figure 2.1 and 2.2 provide an overview of corporate restructuring activity over time.

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