Implications of Merger Control on Swedish M&A

Abstract: A merger or an acquisition in Sweden, with a turnover exceeding a certain threshold, shall be notified to the Swedish Competition Authority (the "SCA") for approval. The purpose of this thesis is to investigate what effect merger control decisions of the SCA have on the value of the target and the bidder firm involved in a merger or an acquisition. Therefore, in this thesis we document stock price reactions of bidder and target firms on various event dates from the initial deal announcement to the final merger control decision. We have manually collected a unique dataset of 212 observations by revising SCA decisions from the period of July 1996 to July 2010. By using event study methodology we have computed abnormal returns showing, in line with previous research, evidence of a takeover premium among the target and bidder firm abnormal returns. However, in contrast with the results of previous research we do not find any further abnormal stock returns in the merger control process, suggesting a nonexistent market reaction to announcements of SCA merger control decisions. We discuss several reasons for why the market does not react to SCA merger control decisions and conclude, in light of research and interviews, that the two main reasons are that our sample is free from complex mergers cases and that stock price adjustments are already capitalized in the stock prices of subject firms.