Statistical studies over the last forty-five years show that, although there are success stories, very many mergers and acquisitions do not result in the increased operating profits that economics ...textbooks would lead one to expect. As consultancy McKinsey have put it, ‘Anyone who has researched merger success rates knows that roughly 70% fail’. Yet—mysteriously—M&A activity has boomed across the globe, with a forty-fold increase in deals done each year now compared with four decades ago, in spite of the adverse general evidence. How can it be that talented, energetic, highly skilled, law-abiding, income-maximising participants in the M&A market will often promote mergers that lead to no operating gains, frequently with adverse effects on the wider economy too? Drawing on findings from a wealth of statistical analyses and case evidence from many businesses, the book presents answers to this merger mystery. In a synthesis of ideas from several disciplines, solutions are detected in misaligned incentives, distorted financial engineering and information asymmetry. By revealing how weaknesses at multiple points can interact and cumulate to produce inefficient outcomes, the discussion serves as a corrective to the overwhelmingly positive tone of most commentary on M&A, whilst also advocating changes in participants’ contracts, in taxation, and in regulation which could significantly reduce the number of mergers that fail. Designed to be accessible to a wide readership, the book will be of interest to investors, to M&A practitioners and commentators, to researchers and students of economics, political economy, finance, management and accounting, and—importantly—to policy makers working in these areas.
Presenting a model that's both comprehensive and flexible, Holden demonstrates how technical competencies and ethical imperatives can inform the day-to-day workflow of acquisition librarians.
Although numerous studies analyze mergers and acquisitions (M&As) in and out of developed economies (DE), a much smaller number of studies focus on M&As in and out of emerging economies (EE). Since ...there are significant differences in institutional environments, corporate governance practices, and markets between DE and EE, existing knowledge on acquisitions can be extended by examining M&As in and out of EE. This paper addresses this gap and identifies the main findings of studies on acquisitions in and out of EE. The review deals with EE M&A antecedents and performance outcomes, with a focus on what new insights can be gained and what new research directions are revealed. This paper also develops propositions regarding EE M&A antecedents and performance.
Cross-holdings are created when a shareholder of one firm holds shares in other firms as well, and cross-holdings alter shareholder preferences over corporate decisions that affect those other firms. ...Prior evidence suggests that such cross-holdings explain the puzzle of why shareholders allow acquisitions that reduce the value of the bidder. Conducting a shareholder-level analysis of cross-holdings, we instead find that cross-holdings are too small to matter in most acquisitions and that bidders do not bid more aggressively even in the few cases in which cross-holdings are large. We conclude that cross-holdings do not explain value-reducing acquisitions. Beyond acquisitions, we find that institutional cross-holdings between large firms have, in fact, increased rapidly over the last 20 years, but mostly due to indexing and quasi-indexing. As in acquisitions, cross-holdings by active investors are typically too small to matter.
Continued use of acquisitions despite evidence that they do not improve firm performance suggests that challenges associated with acquisitions may be underestimated by managers. We examine how ...employee resistance is influenced by acquisition integration and how it results in lower acquisition performance. Specifically, we examine different impacts of task and human integration on employee resistance in a sample of 92 Nordic mid-size firms. Task integration focuses on achieving synergies from increased efficiency; however, it can increase employee resistance, leading to lower acquisition performance, which is exacerbated by slow integration. Meanwhile, human integration can reduce employee resistance, and this effect is stronger for experienced acquirers. Our results support the importance of considering both task and human integration, as their influence on employee resistance varies. Additional implications for management research and practice are identified.
We study the effects on M&A outcomes of CEO network centrality, which measures the extent and strength of a CEO׳s personal connections. High network centrality can allow CEOs to efficiently gather ...and control private information, facilitating value-creating acquisition decisions. We show, however, that M&A deals initiated by high-centrality CEOs, in addition to being more frequent, carry greater value losses to both the acquirer and the combined entity than deals initiated by low-centrality CEOs. We also document that high-centrality CEOs are capable of avoiding the discipline of the markets for corporate control and the executive labor market, and that the mitigating effect of internal governance on CEO actions is limited. Our evidence suggests that corporate decisions can be influenced by a CEO׳s position in the social hierarchy, with high-centrality CEOs using their power and influence to increase entrenchment and reap private benefits.
The vast majority of cross-border mergers involve private firms outside of the United States. We analyze a sample of 56,978 cross-border mergers between 1990 and 2007. We find that geography, the ...quality of accounting disclosure, and bilateral trade increase the likelihood of mergers between two countries. Valuation appears to play a role in motivating mergers: firms in countries whose stock market has increased in value, whose currency has recently appreciated, and that have a relatively high market-to-book value tend to be purchasers, while firms from weaker-performing economies tend to be targets.
We study the evolution of Korean
chaebols (business groups) using ownership data.
Chaebols grow vertically (as pyramids) when the controlling family uses well-established group firms (“central ...firms”) to acquire firms with low pledgeable income and high acquisition premiums.
Chaebols grow horizontally (through direct ownership) when the family acquires firms with high pledgeable income and low acquisition premiums. Central firms trade at a relative discount, due to shareholders’ anticipation of value-destroying acquisitions. Our evidence is consistent with the selection of firms into different positions in the
chaebol and ascribes the underperformance of pyramidal firms to a selection effect rather than tunneling.
Monitoring: Which institutions matter? Chen, Xia; Harford, Jarrad; Li, Kai
Journal of financial economics,
11/2007, Letnik:
86, Številka:
2
Journal Article
Recenzirano
Odprti dostop
Within a cost–benefit framework, we hypothesize that independent institutions with long-term investments will specialize in monitoring and influencing efforts rather than trading. Other institutions ...will not monitor. Using acquisition decisions to reveal monitoring, we show that only concentrated holdings by independent long-term institutions are related to post-merger performance. Further, the presence of these institutions makes withdrawal of bad bids more likely. These institutions make long-term portfolio adjustments rather than trading for short-term gain and only sell in advance of very bad outcomes. Examining total institutional holdings or even concentrated holdings by other types of institutions masks important variation in the subset of monitoring institutions.
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