What drives merger outcomes?

Our study investigates the role that corporate strategy and negotiating procedure play in driving merger outcomes. The term merger outcome refers not only to how a merger announcement affects the combined wealth of the acquiring- and target-firm shareholders, but also to how the managers distribute...

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Bibliographic Details
Published in:The North American journal of economics and finance 2019-04, Vol.48, p.757-775
Main Authors: Jurich, Stephen N., Walker, M. Mark
Format: Article
Language:English
Subjects:
Bargaining power
Mergers
Negotiation
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Summary:Our study investigates the role that corporate strategy and negotiating procedure play in driving merger outcomes. The term merger outcome refers not only to how a merger announcement affects the combined wealth of the acquiring- and target-firm shareholders, but also to how the managers distribute the gain. We find that expanding the acquiring-firm’s operation geographically and negotiating one-on-one transactions lead to higher combined gains. With regard to the distribution of the gain, we find that acquiring-firm shareholders often receive less of the combined gain when managers initiate acquirer-to-target negotiations. We also find that the percentage of the combined gain that is captured by acquiring-firm shareholders is related positively (negatively) to the size of the acquiring (target) firm.
ISSN:1062-9408
1879-0860
DOI:10.1016/j.najef.2018.08.003