Management Practices and Mergers and Acquisitions

Abstract

We provide new empirical evidence on the sources of value creation in mergers and acquisitions by using a dataset of establishment-level management practices from the U.S. Census Bureau. We find that firms with better management practices tend to acquire establishments with worse management practices, and following the acquisition, improve the target’s management practices. These improvements are larger when acquirers have a greater incentive and ability to make these changes and are also followed by increases in establishment performance. Overall, our findings suggest that spillovers of good management practices constitute an important source of synergies from mergers and acquisitions.

Keywords: Mergers and Acquisitions, Management Practices, Synergies, Value Creation