Motivation Data and methods Results ooo ooo oooo The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Aleš Bělohradský Faculty of Science, Charles University in Prague June 13, 2019 XXII. Mezinárodní kolokvium o regionálních vědách - Velké Bílovice Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation Data and methods Results ooo ooo oooo Boisterous behaviour? Registrations of Societates Europaeae by country of origin 600 500 400 300 200 100 0 ■ Czechia ■ Slovakia ■ Germany ■ Other countries I ■ ■ I ■ 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation ooo Data and methods ooo Results oooo Outline 1. Motivation: European companies in Czechia 2. Data and methods: Logit 3. Results 4. Discussion Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation Data and methods Results •oo ooo oooo A step aside - M&A proximity analysis ► Who acquires whom? ► Geographical proximity, industrial relatedness, organizational closeness shape the M&A market. Ellwanger, N. & R. Boschma (2015) Who Acquires Whom? The Role of Geographical Proximity and Industrial Relatedness in Dutch Domestic M&As between 2002 and 2008 Tijdschrift voor economische en sociale geografie, 106(5), 608-624 □ [31 Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation 0«0 Data and methods ooo Results oooo "he main idea ► Are there differences in M&A behaviour between SE and other listed companies (a.s.)? Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation Data and methods Results oo« ooo oooo Hypotheses M&As with SE are characterized by: 1. More frequent practice of ready-made companies. □ [31 Ales Belohradsky The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation Data and methods Results OO« ooo oooo Hypotheses M&As with SE are characterized by: 1. More frequent practice of ready-made companies. 2. More international deals. □ [31 Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation OO« Data and methods ooo Results oooo Hypotheses M&As with SE are characterized by: 1. More frequent practice of ready-made companies. 2. More international deals. 3. More important cognitive than geographical proxim □ [31 Ales Belohradsky The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation OO« Data and methods ooo Results oooo Hypotheses M&As with SE are characterized by: 1. More frequent practice of ready-made companies. 2. More international deals. 3. More important cognitive than geographical proximity. 4. Increasing probability of a deal with decreasing distance < □ ► < is ► < = > < Ales Belohradsky The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation Data and methods Results ooo •oo oooo Data ► Source: Bisnode. ► Czech company as a target. ► At least 50 % of the company acquired. ► Time span: 2001-2017 ► 126 169 deals Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation ooo Data and methods Results oooo Data Tab. 1: Sampling criteria for deals with SE on the acquirer side Sampling criteria Number of deals Single condition Cumulative Total M&A (acquirer = SE) 7 798 Excluding identical HQ address 5 999 5 999 Different date of acq. from the foundation 1 339 860 Domestic deals 7 740 817 At least 1 employee in the target 2 186 270 Excluding acquirers from Prague 2 071 104 Source: author's calculations. Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation Data and methods Results ooo o«o oooo Data Tab. 2: Sampling criteria for deals with SE on the target side Sampling criteria Number of deals Single condition Cumulative Total M&A {target = SE) 2 008 Excluding identical HQ address 1590 1590 Different date of acq. from the foundation 202 122 Domestic deals 1939 68 At least 1 employee in the target 441 34 Excluding acquirers from Prague 592 10 Source: author's calculations. Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation ooo Data and methods oom Results oooo Logistic regression ► Firth logit (rare events data) ► LHS: occurence of a deal (for every deal 20 random chosen potential targets) ► RHS: Dummies for the same: ► region/district/city (geographical); ► NACE section/division/group/class (cognitive); ► legal form (organizational proximity). Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation Data and methods Results ooo ooo •ooo Hl, H2: more frequent ready-made and international deals Tab. 3: Two sample t-tests for equal means between ES and listed company (a.s.) Tested binary variable mean t-test ES a.s. Pr{T=t) Date of acq. equal to foundation (acquirer = ES/a.s.) International M&A (acquirer = ES/a.s.) International M&A (target = ES/a.s.) 0.828 0.050 0.443 0.495 0.141 0.472 Note: Welch's approximation for unequal variances used Source: author's calculations. 0.000 0.000 0.484 Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation Data and methods Results ooo ooo otoo H4: proximity matters Tab. 4: Logit results for mergers and acquisitions with SE as an acquirer 2004-2017 2004-2017 2004-2017 2004-2017 Spatial proximity Time distance (log inverse) 0.647(0.040) * * # Same region (NUTS3) 1.681(0.230) *** 1.726(0.231) * * # Same district 1.035(0.100) *** 0.999(0.101) * # sfc Same city 2.048(0.116} *** 1.991(0.117} *** Industrial proximity Same section (NACE1) 0.641(0.152) *** 0.613(0.155) + * # 0.587(0.155) * # # Same division (NACE2) 0.353(0.164) ** 0.326(0.166} ** 0.341(0.166) * * Same group (NACE3) -1.424(1.007) -1.450(1.012) -1.398(1.009) Same class (NACE4) 0.854(0.106) *** 0.753(0.108) * * # 0.745(0.107) * * * Organizational proximity Both SE 1.332(0.270) *** 1.435(0.267) *** Sector dummy yes yes yes yes Year dummy yes yes yes yes Region (NUTS3) dummy yes yes yes yes Pseudo R Sq. 0.05 0.01 0.06 0.06 Obs. 16 871 16 853 16 853 16 813 Source: author's calculations. Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation Data and methods Results ooo ooo oo«o H3: more important cognitive proximity Tab. 5: Logit results - comparison with listed companies (a.s.) ES a.s. Spatial proximity Same region (NUTS3) 1.726(0.231) * * * 1.666(0.055} * * * Same district 0.999(0.101) * * * 0.982(0.033) * * * Same city 1.991(0.117) *** 2.333(0.038) *** Industrial proximity Same section (NACE1) 0.613(0.155) * * * 0.218(0.052) * * * Same division (NACE2) 0.326(0.166) ** 0.69(0.05) *** Same group (NACE3) -1.45(1.012) 1.243(0.078) *** Same class (NACE4) 0.753(0.108) * * * 0.958(0.043) * * * Organizational proximity Same legal form 1.332(0.27) * * * 0.543(0.029) * * * Sector dummy yes yes Year dummy yes yes Region (NUTS3) dummy yes yes Pseudo R Sq. 0.06 0.08 Obs. 16 853 172 883 Source: author's calculations. Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation ooo Data and methods ooo Results ooo* Conclusions ► Practice of ready-made companies more frequent for SE (83% of recorded deals with the date of target formation). Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation ooo Data and methods ooo Results ooo* Conclusions ► Practice of ready-made companies more frequent for SE (83% of recorded deals with the date of target formation). ► More internationalized? Rejected. Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation ooo Data and methods ooo Results ooo* Conclusions ► Practice of ready-made companies more frequent for SE (83% of recorded deals with the date of target formation). ► More internationalized? Rejected. ► Less dependent od spatial closeness? Rejected. Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A Motivation ooo Data and methods ooo Results ooo* Conclusions ► Practice of ready-made companies more frequent for SE (83% of recorded deals with the date of target formation). ► More internationalized? Rejected. ► Less dependent od spatial closeness? Rejected. ► SE deviates from the pattern of increasing probability of a deal with decreasing cognitive proximity - in line with the concept of related variety. Aleš Bělohradský The boisterous behaviour of Societas Europaea in Czechia - A proximity analysis of M&A