An analysis of value destruction and recovery in the alliance and proposed merger of Volvo and Renault

• 成果类型: Article
• 署名作者: Bruner, RF
• 署名单位: University of Virginia
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(98)00046-4
• 发表日期: 1999
• 页码: 125-166
• 关键词: mergers; acquisitions; alliances; institutional investors; privatization

摘要

Volvo's attempt to merge with Renault in 1993 temporarily destroyed SEK 8.6 billion (US$ 1.1 billion) in Volvo shareholder wealth. This study traces the destruction to hubris, managerialism, and the escalation of commitment - elements suggested in previous research. In addition, the case suggests path dependence as a source of wealth destruction in mergers. An elaborate structure of cross-shareholdings,joint committees, and a poison pill made it difficult for the strategic allies (Volvo and Renault) to follow any strategic path other than merger if they wanted to exploit economies more fully. Activism by institutional investors was instrumental in halting the destruction of shareholder wealth and redirecting the firm. This study reveals significant positive abnormal returns associated with the institutional activism. Consistent with Shleifer and Vishny (1986), institutional 'jawboning' is valuable. An analysis of the voting premium between Volvo's 'A' and 'B' shares suggests that the value created by institutional voice derived from the strategic change in the firm's direction rather than the power of the coalition of institutional investors to expropriate wealth. (C) 1999 Elsevier Science S.A. All rights reserved.