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Post-LOI Deal Value Adjustments in Dutch SME M&A Transactions

Blom, Jaron (2024) Post-LOI Deal Value Adjustments in Dutch SME M&A Transactions.

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Abstract:This study examines the factors influencing deal value adjustments in Dutch SME M&A transactions during the post-LOI phase. Fifteen factors were identified based on the literature review, with seven being analyzed in this study. The study utilizes a comprehensive dataset of 557 completed M&A deals from a Dutch M&A firm, ultimately focusing on 341 sell-side SME M&A deals completed from 2016 to 2023. Using multiple linear regression (OLS), the study explores relationships between the factors, deal value adjustments, and interaction effects. The key findings indicate that extended post-LOI durations significantly influence valuation adjustments, with each additional month resulting in a 0.5% decrease in deal value. In addition, the e-commerce sector significantly impacted absolute deal value adjustments, with average adjustments of about 1.2 million Euros compared to other sectors. When exploring interaction effects, it was found that each additional month in the post-LOI phase leads to a significant average decrease of 1.1% in deal value when the bidder is strategic. Also, the interaction between strategic bidders and pre-exit deals typically leads to an absolute deal value decrease of over €500,000. Key limitations include potential biases from unexamined variables, such as changes in company performance and information asymmetry. Future research should include these variables and explore comparisons with countries outside of Western Europe. Practical implications highlight the importance of vendor due diligence to shorten the post-LOI phase. Academically, this study fills a gap in SME M&A literature by providing a novel analysis of post-LOI deal value adjustments, which is representative for Western Europe.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:https://purl.utwente.nl/essays/100544
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