Performance and Survival of Mutual Fund Mergers: Evidence from Frequent and Infrequent Acquirers

Abstract

In this paper, we study the determinants of mutual fund mergers, and the performance and survival outcomes of the acquirers involved in these mergers. Across all estimations, we distinguish between frequent and infrequent acquirer categories. We first find that the fund’s performance, size, fees, flows and age guide the merger decision. Distinguishing between frequent and infrequent acquirers, we also show that, after the acquisition, the latter exhibit a larger decline in performance than frequent acquirer’s. From deal to deal, frequent acquirers do not seem to target higher performing funds, and suffer from a worsening and persistent poor post-merger performance. We also find that the merger probability of the acquirer is negatively related to within-family acquisitions, mergers involving an infrequent acquirer, fund size and performance of both the target and the acquirer. The target fund’s size and performance have a more important impact on the survival of infrequent (as opposed to frequent) acquirers rather than frequent acquirer funds.