A Statistical Test of the Success of Consolidations

Proactive versus reactive M&A activities in the biotechnology industry

“…Regarding post-restructuring performance of firms, the results are mixed. Some researchers have shown that firms tend to profit from M&A (e.g., Chatterjee, 1992;Gugler, Mueller, Yurtoglu, & Zulehner, 2003) while others have shown that firms typically do not profit (Dewing, 1921;Hogarty, 1970). However, little research investigates the characteristics of firms that engage in M&A activities.…”

On Measuring the Effects of Industrial Mergers

“…Although all of the studies listed have used some measure of profitability a number of distinct but related hypotheses have been tested and this "Adjustments for this factor can be crucial to an empirical study (Kilpatrick,6 For two recent surveys of the empirical literature see Eatwell, 1971 and Weiss, 1968).…”

“…As we have seen, during the period of intense merger activity the total growth of the acquirers was very high compared to that of the control group. Furthermore, one fairly persistent result of profitability studies has been the clear correlation between growth and profitability (Eatwell, 1971). The interesting question then arises of whether during a period of rapid external growth profitability can be maintained in spite of assimilation problems.…”

The impact of mergers on acquiring firm shareholder wealth: The 1905?1930 experience

“…Even on this limited basis, economists hotly debate the merits of industrial consolidations. In the two assessments of mergers near the turn of the century, Dewing (1921) concludes consolidations largely failed to raise profits or live up to pre-merger expectations, while Livermore (1935) concludes acquisitions generally created highly profitable firms. Even today financial economists usually contend takeovers create value by sharply raising target firm stock price, while industrial organization economists typically argue takeovers reduce value by lowering ex-post profits of acquiring firms (Caves, 1989).…”

“…Investors fared only slightly better during the merger wave at the turn of the century. According to Dewing (1921), the giant consolidations generally failed to expand profits and rarely lived up to the exaggerated claims of their promoters.…”