Handbooks of Research Methods and Applications series
Edited by Adrian R. Bell, Chris Brooks and Marcel Prokopczuk
Chapter 12: Empirical mergers and acquisitions research: a review of methods, evidence and managerial implications
Mergers and acquisitions (M & As) are among the most important corporate events in the finance and business world in terms of both size and impact. For instance, at the peak of the most recent merger wave in the year 2007, corporations spent more than US$4 trillion, or over 7.5 per cent of world gross domestic product (GDP) (in market exchange rates), on acquisitions worldwide. Takeovers effect substantial reallocations of resources both within and across industries, and shape the corporate landscape. A carefully designed and executed acquisition can create substantial value for the merging firms by improving operational efficiency and taking advantage of other synergistic gains from combining business activities. However, bad acquisition decisions can also destroy viable business entities and cost executives their jobs. Academic research on the topic of corporate takeovers is abundant. This is not surprising given the above discussion. In addition, while M & As are of interest in themselves, they also serve as a testing ground for many economics and finance theories as these transactions are the largest and the most readily observable form of corporate investment; there are almost no data on the investment projects that firms routinely undertake during the course of their business.
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