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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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3. Research Foundation


3.  Research Foundation

This Chapter introduces the basic concepts that constitute the foundation of the analyses conducted in Chapters 4 to 7. First, a brief definition of mergers and acquisitions (M&A) as well as corporate divestiture is given in order to establish the use of these terms throughout my thesis. Second, the basic approaches and methodologies of analyzing value creation of M&A and corporate divestiture are introduced and discussed.

3.3  Corporate restructuring, M&A, and corporate divestiture

Focus of the presented analyses is corporate restructuring by the means of mergers and acquisitions (M&A) and corporate divestiture. Corporate restructuring in general is a broad term that can be applied for various changes in organization, ownership structure, and corporate control throughout the life cycle of a corporation. The understanding of corporate restructuring in this thesis is more specific and pertains to the reconfiguration of the corporate portfolio by expansionary M&A or by the disposal of firm assets through divestments (Copeland and Weston 1988). Furthermore, the understanding of corporate restructuring focuses on changes in ownership of firm assets that result in the transfer of control, i.e., the majority of public or private equity from a seller to a buyer. The interaction between seller and buyer, thus, form a market for corporate control (Jensen and Ruback 1983). The two forms of corporate restructuring addressed by this study, M&A and corporate divestiture, are defined below:


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