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A Century of Corporate Takeovers: What Have We Learned and Where Do We Stand? (previous title: The History of M&A Activity Around the World: A Survey of Literature)

45 Pages Posted: 6 Oct 2005 Last revised: 10 Jan 2009

Marina Martynova

Cornerstone Research; Tilburg University - Department of Finance

Luc Renneboog

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

Abstract

This paper reviews the vast academic literature on the market for corporate control. Our main focus is the cyclical wave pattern that this market exhibits. We address the following questions: Why do we observe recurring surges and downfalls in M&A activity? Why do managers herd in their takeover decisions? Is takeover activity fuelled by capital market developments? Does a transfer of control generate shareholder gains and do such gains differ across takeover waves? What caused the formation of conglomerate firms in the wave of the 1960s and their de-conglomeration in the 1980s and 1990s? And, why do we observe time- and country-clustering of hostile takeover activity? We find that the patterns of takeover activity and their profitability vary significantly across takeover waves. Despite such diversity, all waves still have some common factors: they are preceded by technological or industrial shocks, and occur in a positive economic and political environment, amidst rapid credit expansion and stock market booms. Takeovers towards the end of each wave are usually driven by non-rational, frequently self-interested managerial decision-making.

Keywords: takeovers, mergers and acquisitions, diversifications, takeover waves

JEL Classification: G34

Suggested Citation

Martynova, Marina and Renneboog, Luc, A Century of Corporate Takeovers: What Have We Learned and Where Do We Stand? (previous title: The History of M&A Activity Around the World: A Survey of Literature). Journal of Banking and Finance, 2008; ECGI - Finance Working Paper No. 97/2005. Available at SSRN: https://ssrn.com/abstract=820984

Marina Martynova (Contact Author)

Cornerstone Research ( email )

699 Boylston St
Boston, MA 02116
United States

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Room B 906
5000 LE Tilburg
Netherlands

Luc Renneboog

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 ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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