M&A in the Construction Industry -Wealth Effects of Diversification into Real Estate Life Cycle Related Services
Author
Start Page / End Page
Volume
Issue Number
Year
Publication
Nico Rottke, Dirk Schiereck, Stephan Pauser
283 / 310
14
3
2011
International Real Estate Review
Abstract
Since the late 1990s, the construction industry has undergone a change in business model, as contractors vertically expand their operations to other parts of the real estate life cycle. The question arises on whether construction companies have superior abilities as real estate service providers. We have examined the value implications of 106 large merger and acquisition (M&A) transactions in the construction industry worldwide from 1986 to 2006. We inquire if a vertical expansion of the construction value chain in the real estate life cycle through M&A leads to the creation of shareholder value. We find out that this is not the case. M&A success is mainly determined by industry-specific size effects and common agency conflicts.
Keywords
Construction industry; Cross-border acquisitions; Bidder gains; Global diversification