The performance of cross-border acquisitions targeting African firms and the capital structure influence on the method of payment
Nkiwane, Prince Ken
Aim: The purpose of this study is to examine the performance of cross-border mergers and acquisitions (CBAs) into Africa. Given that the method of payment predicts the performance of an M&A deal, the study further investigates the influence of capital structure on the method of payment. Design, methodology, approach: The study first explores BHARs for the entire sample then the study splits the main sample into developed and emerging acquirers for a detailed analysis. ROEs and ROAs are also examined to assess the robustness of performance. The study then uses panel data of 503 deals from 43 developed and emerging countries in the three years postacquisition. The panel data employs the GLS random effects regression technique. With regards to the influence of capital structure on the method of payment, the study uses crosssectional logistic regressions on the full sample first, followed by the developed economy acquirer sub-sample. Findings: Four key findings emerge from the study. Firstly, on aggregate Africa bound CBAs significantly underperform. Secondly, emerging economy acquirers outperform their developed economy counterparts. Thirdly, firms with low leverage have a higher propensity to use cash as a method of payment. Finally, financial slacking positively predicts the use of cash as a method of payment. The third finding lends some support for the pecking order theory; however, it lends no support for the market timing theory which is a dominant theory in choice of method of payment in the M&A setting. Originality: The study examines the performance of deals exclusive to the African continent. It compares the quality of performance based on the acquirer country economic characteristics, a trailblazing quest considering available literature. Financing choices are explored in an environment (international setting) that is faced with more funding complexity (in contrast to domestic acquisitions).
A masters dissertation submitted to the Faculty of Commerce, Law and Management, at the University of Witwatersrand in fulfilment of the requirements for the degree of Master of Commerce
Nkiwane, Prince Ken (2018) 4The performance of cross-border acquisitions targeting African firms and the capital structure influence on the method of payment, University of the Witwatersrand, Johannesburg, https://hdl.handle.net/10539/27008