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

Abstract

If one looks at the market for corporate control from a research perspective, it is especially interesting to analyze whether the decision-makers in the companies take advantage of phases with low asset prices to buy out other companies (behaving anticyclically), or whether they tend to buy during phases with high asset prices-buying procyclically. The aim of this article is to test whether there is a correlation between a company's M&A behavior and the situation in the capital market. Whether M&A success can be seen as dependent on different market valuations and whether differences in terms of the various factors which influence pro-and anticyclical M&A transactions can be determined. The analysis is done with regard to the development of the DAX, the German stock exchange market index. 78 transactions by German purchasing companies during the period 1998 to 2009 were analyzed. The results show that M&A behavior is a procyclical phenomenon and that anticyclical transactions are more successful than procyclical ones in the long term.

A unified theory of forward‐ and backward‐looking M&As and divestitures

“…Interestingly, M&A activity typically occurs in waves, with six waves in the last 118 years (Meckl, ; Müller‐Stewens, ), suggesting the importance of market conditions. Eisenbarth and Meckl () find that M&A activity is procyclical and each M&A wave in the past was ‘accompanied by sinking interest rates, increasing stock market and increasing economic growth, p. 546.’ This empirical evidence is consistent with our conclusion that the tendency to integrate early is stronger if the chance of making deals in the market is higher or if the market is expanding quickly. The chance of making deals in the market can be measured by the intensity of stock market activity.…”

“…The chance of making deals in the market can be measured by the intensity of stock market activity. Indeed, Eisenbarth and Meckl () find a significantly positive correlation between stock prices and M&A activity.…”

“…There is a large literature on the timing of M&As (Bruner, 2004;DePamphilis, 2011;Eisenbarth & Meckl, 2014;Harford, 2005;Meckl, 2012;Müller-Stewens, 2010;Shleifer & Vishny, 2003). Interestingly, M&A activity typically occurs in waves, with six waves in the last 118 years (Meckl, 2012;Müller-Stewens, 2010), suggesting the importance of market conditions.…”

“…Interestingly, M&A activity typically occurs in waves, with six waves in the last 118 years (Meckl, 2012;Müller-Stewens, 2010), suggesting the importance of market conditions. Eisenbarth and Meckl (2014) find that M&A activity is procyclical and each M&A wave in the past was 'accompanied by sinking interest rates, increasing stock market and increasing economic growth, p. 546.'…”

Įmonių susijungimai ir įsigijimai: iššūkiai ir kylančios galimybės ekonominio nestabilumo metu

“…White (1987) unanimously conclude that changes in economic growth and capital market conditions are positively related to the intensity of takeover activity. However, there are inconclusive results regarding outcomes of M&A transactions throughout economic cycle (Eisenbarth, Mecki, 2014;Becketti, 1986;Martynova, Renneboog, 2008).…”