New Evidence and Perspectives on Mergers

Abstract

Empirical research on mergers and acquisitions has revealed a great deal about their trends and characteristics over the last century. For example, a profusion of event studies has demonstrated that mergers seem to create shareholder value, with most of the gains accruing to the target company. This paper will provide further evidence on these questions, updating our database of facts for the 1990s.But on the issue of why mergers occur, research success has been more limited. Economic theory has provided many possible reasons for why mergers might occur: efficiency-related reasons that often involve economies of scale or other "synergies"; attempts to create market power, perhaps by forming monopolies or oligopolies; market discipline, as in the case of the removal of incompetent target management; self-serving attempts by acquirer management to "over-expand" and other agency costs; and to take advantage of opportunities for diversification, like by exploiting internal capital markets and managing risk for undiversified managers.Most of these theories have been found to explain some of the mergers over the last century, and thus are clearly relevant to a comprehensive understanding of what drives acquisitions. In addition, some of these reasons for mergers appear to be more relevant in certain time periods. For example, antitrust laws and active enforcement have made merger for market power difficult to achieve since the 1940s. The heyday of diversification mergers was in the 1960s, and there is evidence to suggest many of those mergers were ultimately failures. Mergers as instruments

Sources of Synergy Realization in Mergers and Acquisitions: Empirical Evidence from Non-Serial Acquirers in Europe

“…This run-up may arise from information leakage and/or insider trading, thereby anticipating part of the M&A value creation (e.g., Craninckx and Huyghebaert, 2011). Although prior studies in general report a negative or, at best, an insignificant bidder announcement return (e.g., Andrade et al, 2001;Martynova and Renneboog, 2008;Bouwman et al, 2009), we find that the shareholders of the acquiring firm gain significantly upon deal announcement. Over the three-day window surrounding the M&A announcement date, the average bidder CAR equals a highly significant 1.21%.…”

The Unusual Case of the Discount Offers for Taking the Control: Evidence from Romania

“…Many studies investigate the size of the control premium and its determinants (Nenova, 2003;Dyck and Zingales, 2004, among a long list of papers). Different studies highlighted the differences from one country to another (Nenova, 2003) or from one industry to another (Andrade et al, 2001).The difference between the tender offer price and the price before the announcement can be explained through synergistic effects, agency problems, bargaining powers of the participants to transaction, lack of liquidity for the shares of the acquired company, but also through a lower level for the market efficiency (Dragotă et al, 2013).…”

Optimizing the Timing of M&A Decisions—An Analysis of Pro- and Anticyclical M&A Behavior in Germany

“…economic, technological or regulatory changes [18]- [21]) and the level of abstraction (industry-versus macro-shocks) [3] [14] [16] [22]- [24]. Real option models [25]- [30], which can also be assigned to neoclassical theories, research M&A behavior on the assumption that there is a learning process and by using game theory concepts 5 .…”