Nenad Vretenar

Post-Acquisition Performance of Croatian Companies Acquired by Foreigners

The issue on whether foreign owners bring prosperity to individual firms and to society is highly debated in Croatia. It arises especially at times when there is a sell-out of a larger Croatian company to a foreign business group. In this paper we study the influence of ownership structures on the financial performance of Croatian companies by comparing firms with a majority share of foreign ownership, with companies that are still dominantly owned by the government privatization fund. We also look at companies privatized through ESOP programs as a third referential group. The study departs from the hypothesis that ownership structures affect governance and so can lead to better firm performance providing owners have the authority to act and possess pertinent information and adequate incentives. We examine a sample of 63 firms for ownership-performance relations and attempt to give explanations of possible reasons why should firms acquired by foreigners, especially company groups, perform better. Our study does indicate that foreign owners achieve better financial performance than other ownership structures. However, based on our research alone, we cannot argue that such performance results solely out of better governance.

Impact of Cross-Border M&As on Firm Employment - The Case of Croatia

Some of the most important aspects of globalization refer to free capital flows and internationalization of firm ownership. This paper reports on some preliminary observations considering two important phenomena that will influence future Croatian economic development: cross-border M&As and employment. So far, in the case of Croatia, cross-border M&As had attracted interest primarily as a source of fresh capital that would nurture future investments in technology, products and markets. Considering the shortage of capital and the slow rate of restructuring underwent by Croatian companies in the nineties, it was only natural that macroeconomic issues relating to capital flows (FDI), gross fixed capital formation and employment would dominate discussion. The issue of relinquishing control that comes along the acquisition of ownership stakes of Croatian companies by foreign owners has come under criticism only more recently. Without providing any final conclusion on the net benefits of cross- border M&As we tried to raise some evidence on the behavior of foreign owners as compared to domicile owners. In this paper we focus on employment, first because we believe employment may serve as an indicator of “broad” social impact of cross- border M&As and second, because of methodological reasons. We analyzed company data provided by the Croatian Securities Exchange (now HANFA). We found that it is not so much the type (nationality) of owners that affects labor practices, but first and utmost, business performance in terms of profits and losses.

M&As in Croatia - Operating Performance Of Publicly Listed Firms Following Takeover

Mergers and acquisitions (M&As) are one of the most widely used means in achieving growth and development of firms. There have been numerous empirical studies questioning the success of M&As in increasing the firms’ value for their owners, both in the short and long run, and in increasing operational efficiency of the newly established system. Even though varying in methodology, sample size and structure, monitored time and geographical spread, the majority of research indicate that many M&As fail in accomplishing described criteria, i.e. that they do not increase the firm’s business success. Among the reasons of M&As failures most frequently cited are: overpaying the target, inadequate due diligence, mistakes in corporate strategy, difficulties and lack of speed in the processes of post acquisition coordination and integration of the two former firms into one economic system. However, the postacquisition performance of target firms is relatively neglected and unexplored.From the Croatian perspective, analyses of the success of target firms following the takeover seem to be relevant and needed. Statistic data shows that Croatian firms participate in cross-border M&As mainly as takeover targets. The privatisation process of state owned firms is to some degree still active and unfinished. Furthermore, takeovers are frequently viewed as an attempt to avoid bankruptcy of under performing firms. This paper focuses on analysing operational efficiency gains of Croatian firms taken over after the year 2000. On the sample of publicly listed firms, the author analyses a seven-year time spread (two years prior and five-year following the takeover). The gathered data compares relative values of assets, equity capital, staff turnover, labour productivity and profits/losses of sample firms. The results of analyses add some light to the relatively neglected post-acquisition performance of target firms, and provide a better understanding of the M&As processes in Croatia and other developing countries with similar economic background.

Firm Growth Dynamics in Croatia after 2000

The paper reports on an exploratory study, run as part of a broader research of international competitiveness of Croatian firms. It provides some tentative observations on the relationship of firm size to industrial dynamics and national competitiveness.By observing changes in average firm size in a five year period, we search for explanations that can relate a falling average firm size with a rising GDP, a fact which contradicts general expectation. The most likely conclusion is that a period of steady economic growth has attracted new entrepreneurship thus causing the average firm size to decrease. At the same time, exposure to international competitive pressures raised the investment activity which led to an increase in labor productivity, which was able to compensate for eventual diseconomies of scale.