Industry Aspects of Takeovers and Divestitures: Evidence from the UK

Posted: 24 Nov 2004

See all articles by Ronan Powell

Ronan Powell

University College Dublin (UCD) - Michael Smurfit Graduate School of Business

Alfred Yawson

University of Adelaide; Financial Research Network (FIRN)

Abstract

This paper examines takeover and divestiture activity at the industry level for the population of UK firms over the period 1986 to 2000. Consistent with US research, takeovers in the UK cluster both across industries and over time. The evidence for divestitures indicates clustering across industries only. The paper further investigates whether broad and specific industry shocks (e.g., growth, free cash flow, concentration, deregulation, foreign competition, technology, stock market performance) explain takeover and divestiture clustering at the industry level. The results suggest that broad shocks increase (decrease) the likelihood of takeovers (divestitures), although not significantly for takeovers. Specific industry shocks that increase the likelihood of takeover activity include low growth, the threat of foreign competition and high stock market performance. For divestitures, high industry concentration and deregulation increase activity. Little evidence is found for deregulation as a significant factor in explaining takeover activity.

Keywords: Corporate restructuring, Industry shocks, Deregulation, Technology, Panel data

JEL Classification: G34, G38, L1

Suggested Citation

Powell, Ronan G. and Yawson, Alfred, Industry Aspects of Takeovers and Divestitures: Evidence from the UK. Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=622142

Ronan G. Powell (Contact Author)

University College Dublin (UCD) - Michael Smurfit Graduate School of Business ( email )

Blackrock, Co. Dublin
Ireland

Alfred Yawson

University of Adelaide ( email )

No 233 North Terrace
Adelaide, South Australia 5005
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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