Analysis of Acquirer Abnormal Returns in Listed European Real Estate M&A Transactions

Abstract

This thesis analyzes a sample of 70 listed European real estate M&A transactions between June 2013 and June 2023. The analysis is based on three filters: target country, real estate subsegment, and payment structure. The findings reveal significant discrepancies in bid premiums compared to NAV across subsegments, with industrial segment transactions exhibiting a significant average premium of 46% and retail segment transactions occurring at an average discount of 13% to NAV. Additionally, the study finds that cash offers in the sample have higher bid premiums on average than share offers, albeit lower than the premiums in mixed payment offers. By using event study methodology, a sub-sample of 27 transactions is examined to analyze acquirer abnormal returns across multiple event windows. Consistent with prior research, the study demonstrates minor and statistically insignificant impacts on bidders’ shareholder returns. Notably, an intriguing pattern emerged when grouping the sub-sample by payment method. For the [-5/+5] and [-10/+10] event windows, transactions financed with all-cash exhibited higher cumulative average abnormal returns (CAARs) compared to all-share transactions. However, for the [-1/+1] event window, the difference between all-share and all-cash offers was relatively narrow, with slightly higher returns observed for share offers. An additional finding was that for the [-10/+10] event window, combination offers, involving both cash and shares, experienced significantly greater abnormal returns than other offer types.