Abstract
This study examines the change in operating performance of firms which merge for a sample of 324 combinations which occurred between 1967 and 1987. The results indicate that the performance of the merged firms typically improved following their combination. The results are not sensitive to factors such as offer size, industry relatedness between the bidder's and the target's businesses or bidder leverage. Separately, a positive association was found between the abnormal revaluation of the firms involved around the merger and the changes in operating performance observed. We conclude that the results documented in Healy et al. (1992) for a sample of 50 large mergers which occurred during the period 1979 through mid-1984 are not sensitive to sample size or to the period they investigated. The conclusions presented provide additional support for the idea that takeovers are motivated by expectations of improved performance due to the realization of synergistic benefits.
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