Scott Moeller

Assessing market attractiveness for mergers and acquisitions: the M&A Attractiveness Index Score

This paper presents a new scoring methodology designed to measure a countrys capability to attract and sustain business investment activity in the forms of cross-border inflow and domestic mergers and acquisitions (M&A). We compute a theoretically grounded Index of Attractiveness for M&A purposes based on groups of country development factors which have been identified as key drivers of corporate investment activity in economics, finance and management literature. By using the Index, which has been successfully tested against country-level M&A activity in a time series analysis, we show that the drivers of M&A activity differ significantly at different stages of country maturity. Specifically, for mature countries, the quality of their regulatory systems, political stability, socio-economic environment and the sophistication of their physical infrastructure as well as the availability of sizeable assets all determine differences in country-level M&A volume and value activity. For countries at the transitional stage, it is instead their economic and financial health, socio-economic environment, technological developments and the quality of their infrastructure and the availability of sizeable assets which drive M&A activity. We also prove the predictability power of the Index, by a set of Granger causality tests, showing not only how country-level development drives future M&A activity but also how, to some extent, the inverse relationship is also true, i.e. that M&A activity can contribute to country development.

An Analysis of Short-Term Performance of UK Cross-Border Mergers and Acquisitions by Chinese Listed Companies

Using a unique and proprietary database of Chinese cross-border mergers and acquisitions into the UK from 2012 to early 2016, this paper investigates the short-term performance of UK cross-border mergers and acquisitions acquired by Chinese publicly-listed companies. Using event study analysis with four different time-period windows, the results show that Chinese acquirers have earned significantly positive abnormal returns on the first day following the announcement date of M&A deals, however, these positive returns faded away over time. In addition, we conduct the event analysis by sector subsamples. The findings suggest that Chinese acquirers in Real Estate and other business sector deals have gained positive abnormal returns, while those in the Financial sector had negative abnormal returns. Regarding the factors that drive stock performance, the paper takes five of the most related deal characteristics into consideration both in univariate analysis and regression analysis. The results indicate that target form (public/private) and absolute transaction size are the most influential factors on the short-term performance of these Chinese acquiring firms: acquirers engaged in deals where the target firms are UK private and small/medium-sized earn statistically significant higher abnormal returns than those UK public and large-sized targets.

Assessing Market Attractiveness for Mergers and Acquisitions: The MARC M&A Maturity Index

This paper develops a new scoring methodology to determine a country’s capability to develop and sustain mergers and acquisitions (M&A) activity on the basis of publicly available and continuously updated information. The study computes a theoretically grounded maturity index for M&A purposes (MARC M&A Maturity Index) using 36 factors in total which capture key legal, economic, financial, political, technological, and socio-cultural characteristics from a total of 175 countries based on information available at the end of 2009. The index is then used to classify different maturity stages of development in M&A activity, i.e., mature, transitional, and emerging markets. The difference in score between the stages of maturity is found to be highest for the political and technological environments, suggesting that these areas of a country’s development stage are prerequisites for M&A maturity. Tests show that it is only the socio-cultural environment that acts as a determinant of M&A activity within the mature markets group, whereas the economic, financial, political, and technological environments determine differences in M&A activity amongst countries in the transitional development stage. Interestingly, political factors appear to be inversely related to M&A activity in transitional markets, while technological and socio-cultural factors seem to slightly explain the scores obtained by emerging economies.

M&A Maturity Index: Evidence from Seven Emerging Markets

This paper develops a useful, robust, and reliable scoring methodology to determine a country’s capability to develop and sustain mergers and acquisitions (M&A) activity on the basis of publically available and continuously updated information. Due to the global economic downturn in 2008-2009, many Western companies are now looking to focus their business expansion in emerging markets where growth possibilities are perceived as better. The focus of this paper is therefore on emerging markets as illustrated by the seven countries selected as case studies (representing key emerging markets), however the scoring methodology could be applied to any country. This study analyses 31 factors in total which capture key legal, economic, financial, political, technological, and socio-cultural characteristics of countries. Each factor has been given a score of 1 to 5, where 1 represents fully open to M&A and 5 represents closed to M&A activity. The findings show an overall score of 2.70 for the seven countries compared to scores of 1.61 and 1.65 for the US and UK, respectively. The lower scores for the US and the UK signify the validity of the scoring methodology since these two countries are regarded as the most developed and open to M&A, and have the highest M&A activity. Interestingly, South Korea has the lowest score out of the seven selected case study countries (1.84), i.e., it is the country found to be best equipped to attract and sustain M&A, owing to the presence of a developed regulatory system, political stability, and high technical innovation. Russia has the worst score (3.26) mainly due to economic and political instability, making it a less attractive market.

Distress resolution strategies in the banking sector: Implications for global financial crises

This chapter investigates the effectiveness and the motivation behind the choice of different types of distress resolution strategies in the banking sector. This is a global study that analyzes key financial characteristics of distressed banks that were either acquired by other banks, divested assets, or were subject to government intervention, as well as the change in the financial profile of those distressed institutions from one year pre-deal to three years post-deal. The results show that governments intervene in the (relatively) best performers that only underperform in liquidity ratios, an indication of critical short-term flow problems. Distressed sellers, the underperformers of the three groups, enjoy much improved performance, in particular in cross-border deals. There is some evidence of foreign acquirers “cherry picking” the least distressed banks, though no significant differences in target performance remain post-deal between cross-border and domestic deals. These findings provide some useful guidance for policy makers globally and for future financial crises that impact the banking sector.