By Andreas Schertzinger, Prof. Dr. Dirk Schiereck
The primary economics of the eu assurance and particularly the effect of the hot fiscal drawback at the monetary providers area tend to reason a wave of M&A transactions within the assurance region. An occasion research of the former M&A cycle within the ecu assurance exhibits that M&A transactions on typical in attaining momentary worth production. even if, there's a major dispersion between person transactions and, within the long-term, the typical M&A transaction destroys value.
Andreas Schertzinger identifies determinants of winning transactions, similar to transaction timing and diversifying transaction process, via a multivariate statistical research. case reports illustrate luck elements particularly on the topic of the behavior of transactions in higher element.
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Additional info for Creating Value in Insurance Mergers and Acquisitions
The combination of two correctly priced companies under CAPM still lie on the security market line, and thus do not increase value for shareholders compared to the standalone entities. , Copeland/Weston (1988, pp 193). , Jennings (1971, p. 131). 28 2 Overview of M&A in the European Insurance Industry Tax optimization Jensen and Ruback (1983, p. 24) define tax optimization as the increase in shareholder profit through a decrease of tax load or a more effective utilization of tax shields. Tax optimization is thus not necessarily value generating from a global perspective, since value is redistributed from tax authorities to transaction partners.
Settnik (2006, p. 125) notes that the disciplining hypothesis requires an information efficient capital market, where valuation of the target suffers from ineffectiveness of current management. Capital market access Sautter (1989, p. 137) argues that M&A may improve access to external capital markets due to cost degression of fixed fees for capital market transactions. g. 62 Co-insurance effect Seth (1994, p. 432) defines the co-insurance effect as an increased debt capacity of merged entities (or reduced probability of insolvency given same financing structure).
Data provided by European Commission on European Commission (2007a). European Commission (2007b, p. 7). European Commission (2007b, p. 39 and p. 45). European Commission (2004) notes that “average market share of the 5 largest institutions in EU15 countries comes close to 60% in both banking and insurance sectors”, raising concerns of the responsible competition authorities. , x Beitel (2002, p. 17) draws a distinction between economic and strategic motives for M&A, and subdivides economic motives further into value maximizing53 and non-value maximizing motives.