Mergers and acquisitions in LatinAmerica from a buyer’s perspective

Abstract

The following paper investigates 296 mergers and acquisitions in Latin America, which were announced between 2001 and 2019, in order to reveal the impact of temporal factors, geographical factors, economical factors, the transaction volume and the payment method on the development of shareholder value of the acquiring company in the short-term around the announcement date of the transactions. As the proposed event study methodology shows the influence of temporal factors is limited. The same holds for the payment method. Geographical factors, economical factors and the transaction volume, on the other hand, appear to have a significant effect on the valuation of the acquiring firm after conducting a merger or acquisition. Firstly, the picture of improved results of domestic transactions arises. Secondly, mergers and acquisitions which aim to diversify operations appear to provide better results than those consolidating the operational focus. Thirdly, it can be shown that larger transaction volumes tend to destroy shareholder value rather than increasing it. Hence, it becomes crucial for companies, which plan to conduct a merger or acquisition, to consider these factors and implement a suitable transaction design which is in line with the interest of shareholders.