Emerging-market companies are on the prowl. And so they should be. A recent report by Citigroup highlights just how much value emerging-market companies can create for their shareholders through an acquisition.
The US bank reviewed all $250 million-plus, cross-border acquisitions by emerging-market companies between January 1 1991 and December 31 2003, calculating market returns to shareholders of the acquiring company. The rewards are pretty stunning.
In the one-year period following the announcement, the average excess return (measured as the return of the acquirer's stock in excess of a risk-adjusted benchmark or market return) was 8.7%.
Even in the very short term, defined as the period starting five days before the announcement up to five days after the announcement, the average excess return was 1.9%. These figures are "similar to returns observed for cross-border acquisitions...
