Better performance after mergers and acquisitions? The case of US farmer cooperatives

Abstract

PurposeThis study analyzes the long-term effect of merger and acquisition (M&A) activity on the profitability, efficiency and liquidity of the largest 500 farmer cooperatives in the United States.Design/methodology/approachSecondary data from the U.S. Department of Agriculture are complemented with primary data collected from print media publications about M&A activity by US farmer cooperatives. The analysis is based on group comparisons of means and distributions to study the effect of M&A activity on financial performance.FindingsFarmer cooperatives with M&A activity generally have lower profitability, efficiency and liquidity than farmer cooperatives without M&A activity, both at the time of the merger or acquisition as well as afterward. Marketing cooperatives in particular perform worse following M&As. Also, the post-merger performance of farmer cooperatives with M&A activity is not affected by the profitability, efficiency or liquidity of the target.Originality/valueResearch on the post-merger performance of farmer cooperatives is both scarce and dated. This study analyzes the effect of M&A activity for a relatively large sample and a relatively long time period (2005–2020).