Competitive Strategy in Mergers and Acquisitions
53 Pages Posted: 15 Mar 2021 Last revised: 24 May 2022
Date Written: May 18, 2021
This paper uses mergers and acquisitions (M&A) and textual analysis of firms' financial filings to show that competitive strategy constitutes an important determinant of firms' investment decisions. The analysis reveals that becoming an acquirer or a target depends on the strategy. Moreover, M&A deals are more likely between companies implementing the same strategy. Those deals yield higher combined announcement returns, asset and sales growth. The same strategy effect is stronger in a highly competitive environment and within an industry, suggesting that acquirer and target strategic misalignment constraints the optimal response to investment opportunities and market threats.
Keywords: mergers and acquisitions, strategy, synergies, product life-cycle, competition, textual analysis
JEL Classification: L21, G34, M21
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