2007 Oxford Business & Economics Conference
ISBN : 978-0-9742114-7-3
An Econometric Analysis of the Determinants of Takeovers
and Mergers for the UK Real Estate Market
Konstantinos Tatsiramos
Institute for the Study of Labor (IZA), Bonn
Prodromos Vlamis*
University of Cambridge
November 2006
Part of this work has been undertaken at Harvard University during the academic years 2004 2006 while P. Vlamis was a visiting research fellow. Financial support from the Harold Pollman
Fellowship at Harvard and the Hellenic Harvard Foundation is gratefully acknowledged.
*Corresponding author. Address of Correspondence: Department of Land Economy, 19 Silver
street, Cambridge, CB3 9EP, U.K. E-mail: pv214@cam.ac.uk
June 24-26, 2007
Oxford University, UK
1
2007 Oxford Business & Economics Conference
ISBN : 978-0-9742114-7-3
An Econometric Analysis of the Determinants of Takeovers and Mergers for the
UK Real Estate Market
Abstract
The aim of this paper is to empirically identify the factors which are important in explaining takeover
activity in the UK real estate market over the past 20 years. We adopt a dynamic duration analysis which
allows to model the probability of mergers and acquisitions (M & A) as a function of both macroeconomic
variables (inflation, interest rates etc) and company financial ratios. The inclusion of time-varying
macroeconomic variables marks a departure from most previous studies of company acquisitions. The
analysis is based on a unique panel data set collected from Thompson’s DataStream (total number of 139
companies), for the period 1980 to 2001. The findings suggest that the most important determinants of the
takeover activity in the UK real estate market are company liquidity, profitability and debt coverage as well
as financial market volatility, interest rates, current account and the economic cycle. The latter provides
evidence that the macro-economy crucially affects the probability of mergers and acquisitions for the real
estate industry in the UK. This paper represents our effort to build on the existing M & A literature and
develop an early-warning system able to detect companies being a subject of a takeover bid. This will be
useful for the industry professionals, regulatory authorities, shareholders and investors in their attempt to
maximize their wealth.
JEL Classification: G34, C41, L85.
Keywords: Takeovers, Duration Model, Real Estate Companies.
June 24-26, 2007
Oxford University, UK
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