The Shareholder Wealth Effects of Corporate Divestitures in Germany, Austria and Switzerland

Compared to mergers and acquisitions (M&A), corporate divestitures receive only little attention by the public. Typically, information about big M&A deals dominates the business news; however, in recent years, corporate divestitures have become increasingly important as a means of corporate strategy. This development underlines the need for in-depth academic research in this field. Although there has been substantial research undertaken in the US and – to a lesser extent – recently also in Europe, the research about corporate divestitures has been widely neglected in Germany, Austria and Switzerland (the D-A-CH region).
This thesis, which is part of the capital market studies, investigates the shareholder value effects of corporate selloffs and spinoffs for Austrian, Swiss and German publicly traded companies during the period from 2000 to 2014. The research applies event study methodology, which rests on the assumption of efficient capital markets in the semi-strong form, i.e. shareholder value effects are evaluated based on unexpected changes in the market value of the seller immediately at the divestiture announcement. Moreover, the research identifies several factors influencing shareholder value creation. These factors are related to the divestiture transaction itself and the characteristics of the parties involved in such transactions.
The results confirm the findings of previous US and European studies and show that in the D-A-CH region corporate divestitures are creating shareholder value. The abnormal announcement returns in a two-day event window, including the day before the initial public announcement, as well as the actual day of the announcement, average 1.24% for selloffs and 1.92% for spinoffs. In addition, the research shows that the relative size of the transaction in particular, as well as an increase in the corporate focus through the transaction, the use of proceeds, the financial situation of the seller and the type of buyer, influence the magnitude of shareholder value creation. Corporate management should consider these factors prior to making decisions about divestitures.