Failure and Success in Mergers and Acquisitions

CentER Discussion Paper Series No. 2019-026

74 Pages Posted: 12 Aug 2019

See all articles by Luc Renneboog

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Cara Vansteenkiste

UNSW Australia Business School, School of Banking and Finance

Date Written: August 8, 2019

Abstract

This paper provides an overview of the academic literature on the market for corporate control, and focuses specifically on firms’ performance around and after a takeover. Despite the aggregate M&A market amounting to several trillions USD on an annual basis, acquiring firms often underperform relative to non-acquiring firms, especially in public takeovers. Although hundreds of academic studies have investigated the deal- and firm-level factors associated with M&A announcement returns, short-run returns are often not sustained in the long run. Moreover, the wide variety of performance measures and heterogeneity in sample sizes complicates the drawing of accurate and unambiguous conclusions. In this light, our survey compiles the recent literature and aims to identify the areas of research for which short-run returns predict (or fail to predict) long-run performance. We find that post-takeover deal performance is affected by key determinants including serial acquisitions, CEO overconfidence, acquirer-target relatedness and complementarity, and shareholder intervention in the form of voting or activism.

Keywords: Takeovers; Mergers and Acquisitions; Long-Run Performance; Corporate Governance

JEL Classification: G34

Suggested Citation

Renneboog, Luc and Vansteenkiste, Cara, Failure and Success in Mergers and Acquisitions (August 8, 2019). CentER Discussion Paper Series No. 2019-026, Available at SSRN: https://ssrn.com/abstract=3434256 or http://dx.doi.org/10.2139/ssrn.3434256

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Cara Vansteenkiste

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

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