Motives of mergers and acquisitions in the European public utilities: an empirical investigation of the wealth-anomaly

Sanjukta Brahma*, Agyenim Boateng, Sardar Ahmad

*Corresponding author for this work

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    Purpose: This study aims to investigate the motivation and post-merger operating performance of European utility sectors following mergers and acquisitions.
    Design/Methodology/Approach: Motives behind M&A is examined by looking into the relationships between total gains, target gains and acquirer gains. Post-merger operating performance is measured by comparing the the sample of European utilities with a matched portfolio based on size and market to book ratio with respect to five accounting indicators: growth in turnover, growth in earnings before interest and tax, return on assets, net profit margin and growth in fixed assets.
    Findings: Synergy is the primary motive for M&A in the European utility firms. This study also found that post-merger operating performance is negative and significant across all the five accounting indicators matched by size and market to book ratio suggesting that utility mergers underperform in the long-term. The findings suggest that gains accruing to utilities involved in acquisitions are short term in nature.
    Practical Implications: Negative post merger operating performance bears important policy implications as in future antitrust/competition authorities should be more vigilant before approving utility mergers.
    Originality/Value: Public utilities possess several characteristics that are different from industrial firms and therefore need to be examined separately. Empirical literature on mergers and acquisitions is very limited on utilities. This study has addressed this gap by examining the motivation and post-merger operating performance of the European utility firms.
    Original languageEnglish
    Pages (from-to)599-616
    Number of pages18
    JournalInternational Journal of Public Sector Management
    Issue number5
    Publication statusPublished - 9 Jul 2018



    • public utilities, finance, shares, markets

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