Consolidation within the Australian real estate investment trust sector : an evaluation of the impact on unitholder returns

Mergers and acquisitions within the Australian-real estate investment trusts (A-REITs) sector have become a noticeable trend in the last decade. Utilising<br>event study methodology, 36 successful A-REIT mergers and acquisitions<br>between January 1995 and December 2008 were examined. Both target and<br>bidding shareholders experience positive excess returns of 4.27% and 0.54%<br>respectively over the 41 day event window [−20, +20]. Analysis indicates that the<br>cumulative abnormal returns (CARs) for bidding firms are considerably greater<br>than previous research suggests. This study finds higher bidder CARs when scrip<br>or a combination of scrip and cash is used to finance the acquisition. We also find<br>that the relative size or the size of the acquirer have a positive and significant<br>impact on the excess returns of bidding A-REITs. This suggests that the<br>synergistic benefits from the acquisition are a result of economies of scale and<br>increased market power. There is also some evidence that the relative size and<br>method of payment influence the CARs of target firms during the event window.<br>