Theory and Evidence on Mergers and Acquisitions by Small and Medium Enterprises

International Journal of Entrepreneurship and Innovation Management, Vol. 14, Nos. 2/3, 2011

28 Pages Posted: 28 Oct 2012

See all articles by Utz Weitzel

Utz Weitzel

Utrecht University - Utrecht University School of Economics; Radboud University - Economics Department, IMR

Killian J. McCarthy

University of Groningen - SOM Research School

Date Written: 2011

Abstract

The theory of mergers and acquisitions (M&As) has been developed almost exclusively from the study of large deals by large firms. In this paper we argue that the behaviour and success of M&As by small and medium sized enterprises (SMEs) may be significantly different. Accordingly, we revisit established M&A theories, and develop a theoretical framework, and several testable hypotheses, regarding the distinctive features of SME M&As. Our empirical results support our expectations and show that, compared to large firms, acquiring SMEs: rely more intensively on external growth via M&As; are more likely to be withdrawn, suggesting that SMEs are more flexible, and more able to avoid deals that turn sour; and, finally, SME M&As are more likely to be financed with equity rather than debt, indicating that the influential financial pecking order theory is of less relevance to SMEs.

Keywords: mergers, acquisitions, small and medium sized enterprises

Suggested Citation

Weitzel, Utz and McCarthy, Killian J., Theory and Evidence on Mergers and Acquisitions by Small and Medium Enterprises (2011). International Journal of Entrepreneurship and Innovation Management, Vol. 14, Nos. 2/3, 2011. Available at SSRN: https://ssrn.com/abstract=2167686

Utz Weitzel (Contact Author)

Utrecht University - Utrecht University School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

Radboud University - Economics Department, IMR ( email )

Nijmegen, 6500 HK
Netherlands

Killian J. McCarthy

University of Groningen - SOM Research School ( email )

P.O. Box 800
9700 AV Groningen
Netherlands

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