How Have M&As Changed? Evidence from the Sixth Merger Wave

Abstract:     
We examine the characteristics of the sixth merger wave that started in 2003 and came to an end approximately in late-2007. The drivers of this wave lie primarily in the availability of abundant liquidity, in line with neoclassical explanations of merger waves. Acquirers were less overvalued relative to targets and merger proposals comprised higher cash elements. Moreover, the market for corporate control was less competitive, acquirers were less acquisitive, managers displayed less over-optimism and offers involved significantly lower premiums, indicating more cautious and rational acquisition decisions. Strikingly however, deals destroyed at least as much value for acquiring shareholders as in the 1990s.

Number of Pages in PDF File: 42

Keywords: Merger waves, public acquisitions, premium, shareholder gains, method of payment

JEL Classification: G14, G30, G34

Accepted Paper Series