M&A as a Strategy for Improving Energy Intensity - Assessing Strategic Viability and Value Creation for Acquiring Companies Post-Transaction

Abstract

This thesis investigates whether companies can leverage M\&A to improve energy intensity and the potential for this strategy to be value-creating for the company. I find that M\&A is associated with decreased energy intensity for the acquirer, and that the effect remains the same when distinguishing between companies operating in energy intensive industries. This suggests that the improvement is an indirect result of other efficiency gains and raises uncertainty about M\&A as an alternative when the primary goal is to improve energy intensity. I also find that the improvements are greater the worse the acquirer performs relative to the target before the transaction, and that the effect exceeds the technical effect of consolidating a better-performing company. This may signal that gaining access to the target's resources facilitates some of the improvement.

Furthermore, a decrease in energy intensity correlates with improved profitability and positive announcement returns for the acquiring company. However, the identified relationships show weak economic significance and are consistent across industries. This could imply that the energy intensity improvement is an indirect effect driven by other efficiency gains that have equal value-creating impact across industries. Additionally, I find no relationship between the acquirer's energy intensity relative to that of the target before the transaction and the acquirer's announcement returns.