Impact of Pension Plan Funding Status on M&A Activity

Abstract

This study examines the role of pension plan funding status on M&A activity of acquiring/target firms in a large sample of UK corporations. We exploit the funding status of the defined benefit pension plans in order to identify, the dependence of corporate activity in mergers and acquisition market on its pension plan funding status. Pension deficit appear to have a negative impact on the likelihood of target firms being acquired, suggesting pension deficits act as a poison pill.