Predicting the Failure of UK Cross Border Acquisitions

12 June 2017, 12:30 - 14:00

CRASSH Meeting Room, Alison Richard Building

Part of the CRASSH Fellows Work in Progress Seminar Series.  All welcome but please email Michelle Maciejewska to book your place and to request readings.  A sandwich lunch and refreshments are provided.

Dr Nour Adel

Recent years have witnessed a marvelous growth in cross-border mergers and acquisitions (M&As). Many studies report that the portion of cross-border acquisitions in the total volume of M&As increased from around 23% in 1998 to about 45% in 2007, and UK firms have played a noticeable role in this international trend. The UK alone accounted for 31% of worldwide cross-border M&As by the end of year 2000, making UK the largest acquiring country worldwide (UNCTAD, 2000) .

Moreover, many studies mention that during the period 2002–2011, while the value of domestic acquisitions by UK firms dropped by about 70% (i.e. from £25.2 billion in 2002 to £7.6 billion in 2011), there was a big increase in the value of cross-border acquisitions from £26.6 billion in 2002 to £50.8 billion in 2011, representing an increase of over 90%.

Many researchers suppose that financial failure, or stress a situation that a corporate encounters, preventis it satisfying its obligations. These obstructions may include: inadequacy of liquidity, in-sufficiency of equity, non payment debt. Moreover, many studies confirm that financial failure not only involves  inability to repay important mandatory payments but also includes the position of negative net asset value, which means a firm’s total liabilities exceed its total assets from the view of accounting.

I am going to predict the financial failure of UK cross-border acquisitions between (2008-2012). I will apply Altman Z-score model which depends mainly on different financial ratios on my research sample, the main purpose is to help firms to avoid their failure earlier depending on main financial signs.

Nour Adel is a visiting fellow at CRASSH 2016-2018.

While in Cambridge she will be researching how to set up a model of several financial ratios which will help in its turn to forecast the financial failure of UK cross-border acquisitions. The research's examples will focus on cross-border acquisitions that had been made by UK acquirers between 2005-2015. The main purpose of her research is to try to predict the financial failure of these investments two years before its actual happening, which will help to find out more about the actual reasons of their status. For example, many studies affirm that the failure of firms can be attributed to CEO overconfidence, leading them to make incorrect investment decisions and wasting the firm’s resources.

Dr. Adel spent the last five years as a lecturer in Aleppo University (Economics Faculty) teaching under and postgraduate students many different topics in corporate finance. Dr. Adel ‘s research interests focus on  studying and analyzing financial performance for organizations, mainly the European ones and specifically UK investments.