The Long-Term Success of Mergers and Acquisitions in the International Automotive Supply Industry

As a result of economic and structural changes, the automotive supply industry has been facing significant consolidation activity over the last twenty years. The pressure to produce better equipped and less expensive automobiles has created a growing trend towards specialization and internationalization. Mergers and acquisitions (M&A) are now considered as a common strategic response to this trend.

Based on a sample of 230 M&A between 1981 and 2007, Jan-Peer Laabs challenges the short-term return behavior of acquirers in this industry in contrast to their long-term performance based on capital market and financial accounting information. For this purpose, he combines the two most advanced and updated capital market methodologies with a thorough analysis of published accounting information. A clearly negative yet consistent perspective on the long-term value creation potential emerges across the different empirical analyses. Over the three years following M&A transactions, acquirers appear to lose significant value. However, an additional case study on the takeover of Siemens VDO by Continental AG offers a number of valuable key success factors and insights on how to evade the negative return destiny.