Acquisition actions in Australia: a test of acquisitions theory
Christopher B. Malone
Purpose – To examine Australian corporate acquisitions data in the context of contemporary acquisitions theory. Design/methodology/approach – Empirical analysis using event study procedures. Findings – The study of Australian acquisitions shows that domestic acquisitions are more likely to produce favourable market responses for acquirers than foreign direct investment actions. Companies with recent upwards price momentum are also more likely to engage in successful acquisitions. However, the relative “valuation” of acquirers appears to be unimportant in the Australian acquisitions process. The results are linked to the smaller, more isolated, nature of the Australian economy. Research limitations/implications – A long horizon event study methodology could be used. Alternative treatments could be used to assess relative value and competitive advantage. Other smaller isolated markets, similar to Australia, could be considered. Originality/value – The use of international corporate acquisitions data, from Australia, supports both Competitive Advantage Theory and Market Driven Acquisitions Theory. There is little evidence to suggest that Cheap Capital motivates a large number of acquisition actions. The results are linked to the smaller, more isolated, nature of the Australian economy, and show that recent price momentum and the location of the investment are important. This latter finding suggests a form of market segmentation still prevails.
Acquisitions and mergers, Australia, Capital, Competitive advantage
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