The Predictive Power of Pre-Acquisition Performance Dimensions for Post-Merger Success: Evidence from Scandinavian Public Acquirers

Abstract

This thesis investigates the post-acquisition financial performance of Nordic acquirers and examines whether pre-merger firm characteristics explain variation in post-merger outcomes. Using a sample of 323 mergers completed across Denmark, Finland, Iceland, Norway, and Sweden between 2012 and 2022, the analysis employs cross-sectional OLS regressions and panel fixed effects models to assess three dimensions of acquirer quality, namely operating efficiency, financial strength, and growth. The cross-sectional change specifications show a statistically significant average decline of 0.9 percentage points in industry-adjusted EBIT/Assets following a deal, indicating a mean reversion pattern with stronger pre-merger performers experiencing larger relative declines. The level specifications confirm this pattern, with pre-merger EBIT/Assets being a strong positive predictor of post-acquisition profitability but with a coefficient below unity, suggesting that the performance advantage of stronger acquirers gradually erodes towards the sample average. Both findings are further supported by the panel data analysis, which documents a cumulative decline of 1.83 percentage points over the three post-deal years. Pre-merger Tobin's Q emerges as the most robust predictor of decline, while deal-level characteristics are consistently insignificant, suggesting firm quality rather than deal characteristics drives post-acquisition outcomes.