Anali Ekonomskog fakulteta u Subotici (Jan 2017)
Waves of mergers and acquisitions: Causes and effects
Abstract
Activities of mergers and acquisitions are not evenly distributed through time; instead, intense periods of growth and periods of activity slowdown take turns. The purpose of this paper is to examine causes of the cyclical pattern of mergers and acquisitions and examine company performance during the waves of mergers and acquisitions. This paper initially focuses on explanations of terms of mergers and acquisitions. Next, six waves of mergers and acquisitions are presented. Special attention is dedicated to the analysis of different theoretical explanations of waves of mergers and acquisitions, as well as analysis of company performance during a wave of mergers and acquisitions. Two key explanations of the cyclical pattern of activity of mergers and acquisitions are separated: first, merger waves occur as a consequence of company reactions to shocks in the business environment, and second, merger waves are triggered by errors in company valuations. Research results show that acquisitions during the wave created value for shareholders of target companies. Additionally, acquisitions implemented early in the wave have been more profitable compared to acquisitions at the end of the wave. Finally, acquisitions outside waves have been more profitable compared to acquisitions during the waves.
