This project is divided in two parts. In the first part, the objective is to evaluate the impact of the introduction of the Euro on prices paid for European firms taken over, on acquisition premia and on private enterprise discounts. The second part examines the role of private equity funds in the takeover market by looking at how their activities and results differ from those of other participants such as operating firms.
Regarding the first part, existing literature shows that the introduction of the euro led to increases in the value of public companies incorporated in participating countries. In this project, we will test if the introduction of the euro has had a similar impact on the acquisition prices paid in takeover deals and whether and to what extent it has affected the private firm discounts. For example, if the EMU has significantly impacted the liquidity of the takeover market, then we would expect to see lower private firm discounts. Specifically, building on previous literature we will use acquisition multiples in order to estimate possible takeover price changes and will aim to explain any findings. Then we will test if the acquisition price potential change around the introduction of the common currency is different for public versus private targets. With this analysis, we will gain additional insight on the broad impact of the introduction of monetary unions on the value of firms, both public and private, on the cost of financing and on the liquidity and competitiveness of the market for corporate control. Regarding the second part, existing studies show that private equity funds tend to enjoy superior performance than other market participants. We know that non-operating firms usually do not have significant synergies with their targets and pay lower premia than listed operating companies. In this study, we will evaluate the potential sources of their continued success by comparing their acquisition behavior, who they buy and when they buy, vis-à-vis other takeover market participants (listed operating firms). More specifically, for example, we will evaluate whether the differential performance bidding firms, private equity funds versus public operating firms, depends on how they time their acquisitions with respect to merger waves.