Effectiveness of mergers and acquisitions in Maltese listed companies : financial performance, market reactions and shareholder value

Abstract

PURPOSE: The objectives of the paper are to assess the effectiveness of mergers and acquisitions (M&A) in Maltese listed companies on acquirers’ financial performance, to examine the market reactions to M&A announcements and to seek to obtain further insights on the perceived value arising from M&A activity.

METHODOLOGY: The methodology involved an Event Study on acquirers’ share price movements and semi-structured interviews with relevant company representatives and Maltese stockbrokers.

FINDINGS: The findings of the paper indicate that the few M&A cases wherein profitability -measured by growth in earnings before EBITDA - was enhanced and operational efficiency was improved took sound financing decisions despite facing challenging circumstances. The Maltese market was generally non-reactive within relatively short timeframes around announcements although with positive reactions within longer estimation periods. Furthermore, the perceived value by acquirers and stockbrokers varied considerably, yet such value was commonly attributed to effective due diligence and successful integration. The study therefore concludes that recent M& A activity in Malta has often been limited in its effectiveness towards enhancing shareholder value.

ORIGINALITY/VALUE: The paper provides both corporate managers and stockbrokers with insights into M&A activity particularly in a small-state market.