Merger Waves Research Articles

The Effect of Industry Restructuring on Peer Firms

We study the bond price reaction of a merged firms peers, in order to better understand how the market responds to a restructuring. We argue that a merger announcement may signal the possibility of a merger wave to the industry, and in doing so, increase the conditional probability that peer firms might themselves be acquired in the future. However, while peer firm equity holders expect a direct benefit from a potential acquisition—in the form of a price premium—peer firm bond holders can only expect an indirect benefit—in the form of a risk reduction. Consistent with these hypotheses, we show that price reactions are stronger for firms that have a higher unconditional probability of being acquired ex-ante. In addition, we document that, cross-sectionally, the abnormal returns we observe from peer bondholders are concentrated among firms that have the highest expected risk reduction benefit from a potential acquisition. In order to distinguish a potential reduction in risk as the explicit return driver, we show that abnormal bond returns within firm (between different bond issues) are also concentrated among issues that have the highest expected risk reduction benefit.

Stock merger activity and industry performance

We propose a merger activity variable ( MAV ) as an alternative to industry merger waves. Unlike discrete merger waves that separate periods of extreme activity from the rest, our continuous MAV utilizes information in the full range of stock merger activity. We rank Fama-French 12 industries by MAV each quarter and arrange them into 12 bucket portfolios. We examine their prior and subsequent three-year excess returns using calendar-time portfolio method. The prior returns are positively related to MAV ranks while the subsequent returns are negatively related to MAV ranks. This evidence suggests a build-up of misvaluation (undervaluation of relatively less stock merger active industries and overvaluation of relatively more active industries) followed by a correction. On average, the most active industry outperforms the least active industry by 13.46% during the prior period, but underperforms by 10.30% during the subsequent period. Industry operating performance results further support the industry misvaluation theory of stock merger activity.

Capital markets and performance of strategic corporate M&A – an investigation of value drivers

PurposeThe paper investigates the market performance of strategic acquisitions for growth in the fifth and sixth merger waves and outlines the major determinants that affect the performance of acquiring companies in these most complex and most challenging corporate transactions.Design/methodology/approachTo perform the quantitative analysis a unique data sample was built out of acquisitions performed in the 5th and 6th merger waves with an only single purpose – strategic growth. Their performance was first analyzed using the method of market-based event study. In addition, the impact of several non-accounting determinants identified through a thorough literature review was tested using univariate/multivariate regression analysis.FindingsThe new findings of the study state that strategic acquisitions for growth created more value for acquiring companies if they were completed internationally and involved an acquisition of a middle-sized company. Moreover, the acquisition of targets in the less related industries (2-SIC) led to stronger performance of acquirers, especially in the international settings.Research limitations/implicationsThe study suggests additional directions for future research. The future analysis can investigate the post-merger acquisition performance of strategic acquirers and can focus on additional financial (accounting) determinants in the evaluation of performance. This perspective can not only address the limitations imposed by the assumption of efficient capital markets but also provide additional insights.Practical implicationsThe results of current study have important implications for executives performing M&A for growth. They show that the market reaction to M&A announcement can be at least partially anticipated and help managers to plan their strategic moves based on a defined set of variables.Social implicationsThe study contributes to the sustainable, value-creating growth dynamics and encourages Executives to “lead for value.”Originality/value(1) In contrast to the existing studies that do not differentiate between the transaction rationale in their analysis, this paper focuses explicitly only on those acquisitions that have strategic growth as their primary objective and responses therefore, to the problem stated by Halpern (1983). This approach helps to mitigate the distortion of results and make a reliable assessment of the strategic move. (2) The results of quantitative analysis also outline that acquisition of mid-sized targets and larger degree of diversification (2-SIC, international focus) code were associated with higher value creation.研究目的本文旨在研究於第五和第六波的併購浪潮中為增長而作出的策略性收購的市場表現;本文亦概述在這些極其複雜的和極具挑戰性的公司交易中影響作收購公司的表現的主要因素.研究設計/方法/理念為了能進行定量分析,研究人員收集在第五及第六波的併購浪潮中以策略性增長為唯一目的的收購個案、建立一個獨特的數據樣本。研究人員首先以基於市場的事件研究法分析那些進行了收購的公司的表現,並以單變量/多變項迴歸分析法去試驗那幾個透過深入的文獻研究而找到的非會計的決定因素的影響.研究結果研究得出的新發現是、如果以增長為目的的策略性收購是於國際間完成及涉及收購中型公司的話,則這收購行動會給進行收購的公司帶來更多價值。而且、如果收購目標的產業與作收購公司的不太相關的話 (2-標準產業分類),收購行動會為進行收購的公司帶來更強的表現、特別是在國際環境下進行這收購行動.研究的原創性/價值(1) 有別於現時其它於其分析中不區分交易理由的研究，本文明確地表示只集中探討那些以帶來策略性增長為主要目標的收購；因此、本研究對 (哈爾彭，1983年)(Halpern, 1983) 陳述的問題作出了回應。本研究的理念有助於減輕我們對收購結果的曲解，從而讓我們對策略性行動能作出可靠的評估. (2) 定量分析的結果、亦概述了以中型公司為目標的收購及更大程度的多樣化 (2－標準產業分類、以國際為焦點) 代碼與創造更大價值是有關聯的。對日後研究的作用/實際影響本研究的結果對學術界及管理人員均具吸引力，亦為策略規劃提供一個額外的工具.對社會的影響本研究可帶來可持續的及可創造價值的增長動力，又可鼓勵行政主管採用以價值為本的領導方針.

Mergers That Harm Our Health

We are currently facing a new wave of healthcare mergers in the United States. More and more health insurers, such as Aetna, have started merging with powerful drug suppliers, such as CVS. What do these companies hope to achieve by merging? They want to increase their access to our health data. They want to know our individual biology, our medical history, our level of well-being; they want to know where we go, what we buy, how much we sleep; if we can resist sugar, junk food or nicotine; if we exercise and how often we exercise. In other words, they aim to shape our digital health ID. Why? On one hand, health insurers aim to reduce their risks and therefore their costs by improving our level of well-being. On the other, health insurers aim to reduce their costs by discriminating against us. Indeed, by allowing health insurers to gain access to consumers’ prescription history and health habits, these data driven mergers can create substantial barriers to entry for high-risk consumers who want to enter the health insurance services market. Can the U.S. antitrust enforcers address the harm that these mergers create? Specifically, reduced access to health insurance services for a specific segment of consumers? And, if so, how? This article identifies three potential ways in which the U.S. antitrust enforcers could address the harms that these mergers impose on high-risk consumers. First, the U.S. antitrust enforcers could contend that the vulnerable, high-risk consumers constitute a separate relevant market. Second, they could argue that the proposed merger’s negative impact on high-risk consumers should weigh more heavily than its positive impact on low-risk consumers, notwithstanding that the net effect of the merger should be assessed. Third, the U.S. antitrust enforcers may argue that these mergers facilitate a health insurer’s efforts to violate the Affordable Care Act and should, therefore, be prohibited. Thus, this article is the first to address the need for the U.S. antitrust enforcers and the courts to confront the harm that these data driven mergers pose to high-risk consumers. If not, they risk applying antitrust law in a way that further exacerbates the existing health disparities in the United States.

Does Stock Misvaluation Drive Merger Waves?

Despite the mounting evidence that stock misvaluation affects takeover characteristics and outcomes at the deal level, there remains a prolonged debate over whether mispricing drives aggregate industry-level merger activity. We depart from the extant literature and investigate whether stock misvaluation drives industry-level merger waves by contrasting the effects of acquirer valuation during “stock” and “cash” merger waves, defined using pure stock or cash acquisitions during 1981-2015. Using the timing of stock waves, we find that acquirer valuation peaks during wave periods, and acquirers have low stock performance in the 5-year period after the merger bid, with especially acute underperformance for mergers announced during stock waves. There is little evidence of such patterns around cash merger waves. These results suggest that equity misvaluation drives stock merger waves, and agency costs associated with overvalued equity prevent acquirer shareholders from reaping gains from merger waves.

Meer van hetzelfde? Content sharing bij Vlaamse DPG Media-kranten

Abstract Content sharing at DPG Media’s Flemish newspaper brands Belgium’s Dutch-speaking region Flanders has seen a wave of mergers & acquisitions (M&As) in recent years, leading to, according to the government-owned media watchdog, a highly concentrated Flemish media market (). The latest newly founded company is DPG Media, in which the majority of all commercially owned major Flemish news outlets has seen its newsrooms merged into the same Antwerp-based building in early 2020. In this paper, we assess content homogeneity between the print and online versions of the two main newspapers of DPG Media by coding and analysing a sample of articles from 2018, 2019 and 2020. Results reveal only limited increases in shared content for the time being. Through distinguishing betweeninternaland external media concentration, the study serves as a steppingstone towards further content analysis research, in Flanders and beyond.

Growth Strategy and Performance of Selected Small and Medium Scale Enterprises in Anambra State, Nigeria

In numerous sectors, the intense global competition has resulted in a wave of mergers and acquisitions over the years. A company with the aim to remain in the race almost has to merge, buy, orally with another company. Another alternative is to expand and grow the organisation internally, e.g. diversifying, building completely new mills to new markets. Lack of adopting valid and effective growth strategies has been a problem for small and medium scale enterprises leading to a decline in their overall performance. The study thus evaluated the effect of growth strategy and performance of selected small and medium scale enterprises in Anambra State, Nigeria. The study employed a cross-sectional survey research design. The Cross-Sectional survey research design was adopted to obtain information from the focus population concerning the current status of the phenomena through primary data collection. The population for the research comprised of selected small and medium scale enterprises that were registered with SMEDAN and operate in Anambra State, Nigeria. The total number of registered SMEs with SMEDAN as of 2017 was 1,504. The sample size for the study was obtained using the research advisors table. Based on a confidence level of 95 and the level of precision of 5% the samples size is 322 but with the addition of 30% for non-response rate, the sample was given thus as 418. The addition of 30% to the sample size is to ensure that the response rate of the study is attained significantly. Making provision for the non-response rate allows the researcher to improve the rate of response for the survey. The findings of the study revealed that there is a relationship between the two variables. Concerning the exact effect of the penetration strategies on market share, the r2 = 0.452 shows the extent to which the penetration strategies explain the variation in market share of the selected small and medium scale enterprises. The coefficient also revealed that there is a positive relationship between the penetration strategies and the market share of the selected small and medium scale enterprises The study recommended that penetration strategies should be given adequate attention and consideration by different small and medium-sized enterprises to reap benefits. Penetration strategies which are an effective tool for achieving better performance over rival firms should be adequately implemented by the organization.

From Micro to Macro: Aggregate Accruals, Mergers, and Returns. A Discussion of Heater, Nallareddy and Venkatachalam (2021)

Heater, Nallareddy, and Venkatachalam (2021), hereafter HNV, find that aggregate merger and acquisition (M&A) activity explains the ability of aggregate accruals to predict market-wide returns. In this discussion, we delineate HNV’s contribution to accounting literature and provide a review of the emerging stream of micro-to-macro accounting research. We also discuss HNV’s findings in relation to research beyond accounting, including the literature on aggregate return prediction and mergers and acquisitions. Our discussion draws parallels between HNV’s results and prior empirical evidence pertaining to aggregate investment and merger waves and identifies several puzzling inconsistencies. These inconsistencies highlight the lack of a clearly specified mechanism behind the return-predictive ability of aggregate M&A accruals. Finally, we point out the challenges posed by the small sample size and noisy measures of M&A accruals that may affect HNV’s inferences. We conclude by suggesting several directions for future research.

Scientific and technological activities of TNC: current trends and prospects

In the article the authors consider the features of scientific and technological activities of transnational corporations, highlight the main trends and prospects for its development. In particular, it is emphasized that the source of modern development of society and human activity is innovation, and accordingly innovation becomes an important tool for all radical changes in human development and the economic system in general. Scientific and technological development of transnational corporations is a crucial prerequisite for ensuring their profitable activities. The purpose of the article is to analyze current trends and prospects for the development of scientific and technological activities of transnational corporations. The article examines the features of the R & D organization in multinational corporations. The dynamics of expenditures in individual leading TNCs on R&D is given. It is noted that the global nature of competition not only makes innovations more significant for TNCs, but also necessitates the search for new ways to innovate. The paper identifies the main types of technological policy, identifies the reasons for the centralization and decentralization of R & D, as well as possible risks that arise in the implementation of these policies. The experience of developed countries shows that competitiveness is ensured by a number of conditions, the main of which are the accumulated scientific and technological potential, institutional factors of technological progress and the presence of large knowledge-intensive corporations. Therefore, the current trend of scientific and technological activities of TNCs is a new wave of mergers and acquisitions (M&A). The authors present the largest mergers and acquisitions at the beginning of the XXI century. In the last two decades, as a result of the growing internationalization of research, the trend of forming strategic alliances has sharply increased, especially due to the merger of companies in such high-tech industries as pharmaceuticals, telecommunications, semiconductors, etc. Special attention is paid to analysis of the reasons for the formation of strategic alliances. It is shown that in some cases competitors become partners in strategic alliances in high-tech industries. In conclusion, it is noted that in conditions of fierce competition in both international and domestic markets, the ability of companies to operate and develop depends on their ability to create and implement innovations. It is innovations that cause continuous economic change, contribute to the dynamic development and increase the efficiency of both the economic system as a whole and individual enterprise. The scientific and technological development of corporations is the main prerequisite for ensuring and increasing their international competitiveness.

Online Appendix for: 'Listing Gaps, Merger Waves, and the Privatization of American Equity Finance'

Section 1 presents tests for the hypothesis that shifts in technology and industry composition might have played a key role in causing the U.S. listing gap. We replicate our core analysis at the industry level and find no evidence that the dynamics of the number of listing is driven by industry specific shocks. Section 2 compares in a univariate setting the historical M&A activity in the U.S. and in non-U.S. countries using different subsamples of M&A transactions. Finally, section 3 tests the stability of the vector autoregression model reported in Appendix F of the paper.

Study on the Follow-up Measurement of Goodwill of Listed Companies

Nowadays, the wave of mergers and acquisitions in the capital market is still surging. High evaluation does bring high performance, and the huge impairment of goodwill has become a key factor for the frequent Black Swan events of listed companies. Starting from the essence of goodwill, using Chinese A-share listed companies from 2007 to 2019 as samples and based on the market data, distribution analysis and performance impact, this paper argues that problems of goodwill impairment in China are incomplete accounting standards, inexhaustive impairment implementation and incomprehensive market supervision, thus giving reasonable suggestions. Proper follow-up measurement of goodwill is conducive to improving accounting information quality and adapting to capital market demands, which is of great significance to the revision of international standards.

Are biotech and big pharma the perfect match?

Purpose The biotechnology (biotech) and pharmaceutical (pharma) industries have a lot of similarities, particularly regarding their mission to provide lifesaving and life-improving drugs. However, there are some key distinctions between the two industries. It is these differences, however, that make that ideal partners and have resulted in a wave of mergers and acquisitions between the two industries. Design/methodology/approach This research paper offers an insider-outsider approach to the biotechnology and pharmaceutical industries. Based on an extensive review of the industries it offers key insights into the reasons for the multiple partnerships that have developed. Findings The findings demonstrate that the different stages of maturity of the business models of biotech and big pharma make them ideal partners. Both rely on the advantages of the other in their development, hence the wave on M&As between the two industries. Originality/value This article clearly shows how two firms or industries at different stages of maturity can be mutually beneficial. This has led to many acquisitions and mergers.

Innovation in Urban Transit at the Start of the Twentieth Century: A Case Study of Metropolitan Street Railway’s Stealth Hostile Takeover of Third Avenue Railroad

In 1900, a syndicate of investors used open market purchases and manipulative trading strategies to exploit an ongoing financial crisis at the Third Avenue Railroad Company and stealthily gain control of the company. The acquisition occurred during the first great merger wave in U.S. history and represented the street railway industry’s response to a new technology, namely electrification. The lax regulatory environment of the period allowed operators and insiders to profit handsomely and may have benefited consumers, but possibly harmed some minority shareholders. Our case study illuminates an unusual acquisition, when capital markets were less transparent.

Acquisitions and funding conditions

We find evidence that aggregate funding conditions play an instrumental role in mergers and acquisitions (M&A). Funding conditions impact the benefits, participants and the number of deals transacted and this impact extends well beyond merger waves. Specifically, when aggregate funding conditions are favorable, the merger market is especially active and small, financially-constrained firms participate heavily. These same firms, however, are largely absent from the deal market when funding conditions are tight. Furthermore, investors view deals during favorable environments as relatively attractive, particularly if the deals are initiated by small bidders. In contrast, deals transacted by large firms during easy-money periods are viewed as value-destroying. We also document that these value-destroying deals are particularly prevalent among large bidders with significant potential for agency costs. Overall, our results suggest that aggregate funding conditions do not merely cause bidders to adjust the scope of their investment decisions consistent with capital rationing, but rather, the changing state of aggregate funding appears to significantly determine the size and composition of the M&A potential bidder pool.

Optical follow-up of the neutron star–black hole mergers S200105ae and S200115j

LIGO and Virgo’s third observing run revealed the first neutron star–black hole (NSBH) merger candidates in gravitational waves. These events are predicted to synthesize r-process elements1,2 creating optical/near-infrared ‘kilonova’ emission. The joint gravitational wave and electromagnetic detection of an NSBH merger could be used to constrain the equation of state of dense nuclear matter3, and independently measure the local expansion rate of the Universe4. Here, we present the optical follow-up and analysis of two of the only three high-significance NSBH merger candidates detected to date, S200105ae and S200115j, with the Zwicky Transient Facility5. The Zwicky Transient Facility observed ~48% of S200105ae and ~22% of S200115j’s localization probabilities, with observations sensitive to kilonovae brighter than −17.5 mag fading at 0.5 mag d−1 in the g- and r-bands; extensive searches and systematic follow-up of candidates did not yield a viable counterpart. We present state-of-the-art kilonova models tailored to NSBH systems that place constraints on the ejecta properties of these NSBH mergers. We show that with observed depths of apparent magnitude ~22 mag, attainable in metre-class, wide-field-of-view survey instruments, strong constraints on ejecta mass are possible, with the potential to rule out low mass ratios, high black hole spins and large neutron star radii.

International Trade and the Propagation of Merger Waves

Abstract Cross-border merger activity is growing in importance. We map the global trade network each year from 1989 to 2016 and compare it to cross-border and domestic merger activity. Trade-weighted merger activity in trading partner countries has statistically and economically significant explanatory power for the likelihood that a given country will be in a merger wave state, at both the cross-border and domestic levels, even controlling for its own lagged merger activity. The role of trade as a channel for transmitting merger waves is confirmed using import tariff cuts and trade sanctions as instruments to mitigate endogeneity. Overall, the full trade network helps our understanding of merger waves and how merger activity propagate across borders.

Better Together? An Examination of the Relationship Between Acute Care Hospital Mergers and Patient Experience

The United States is experiencing another wave of hospital mergers. Whether patients benefit from these mergers, however, remains an open issue for many interested stakeholders. One measure of the potential benefit of hospital mergers is how they affect patient experience. This study used a quasi-experimental design to examine the relationship between hospital mergers and four different Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) ratings (i.e., overall, physician communication, nurse communication, and staff responsiveness). The study findings showed an association between hospitals that experienced a merger and slower growth in HCAHPS scores for two of the four HCAHPS domains (overall and nurse communication) when compared to matching hospitals that did not merge. Findings from this study can guide and inform hospital administrators, health system boards, state and federal government regulators and policymakers, and others across the spectrum of healthcare stakeholders.

Data Management System for Ubiquitous Multi-task Mobile Devices on Semi-network OS Architecture

This study is to explore a newly configured data management system of Internet of Things and other intelligent technologies in ubiquitous computing based on semi-network OS architecture.
 Modern Internet of Things and other intelligent technologies have increasingly shown a trend of diversification and ubiquitous computing, and the usual mobile devices characterized by “single-task”, “stable”, “oriented”, and “immutable” are also bound to face the pressure and motion of reform and innovation.
 The advancement of merger of single-task mobile devices will be unstoppable, and the operating system rightfully needs to be divided into “base portion” and “expanded portion”, which just fits the concept of semi-network operating system architecture; the “base portion” is similar to existing “embedded operating system”, and the “expanded portion” is network resources.
 Today, the merger of single-task mobile devices and the formation of multi-task mobile devices have become general trend, and architecture of semi-network operating system can lay a new foundation for this wave of merger.
 The multi-task mobile device formed by merger of single-task mobile devices based on architecture of semi-network operating system has its special computing system: co-mobile computing system, where including a data management system.
 Multi-task mobile devices form a so-called co-mobile computing system, and also form a newly configured secure data management system, which is like a universal key to form a new working system for opening a lot of unspecified locks based on new principle and security mechanism.

BANKING CONCENTRATION IMPACT ON MARKET STRUCTURE OF POST-SOVIET AND EU MEMBER COUNTRY – ESTONIA

The new wave of mergers and acquisitions after the global financial crisis intensified the interest of policy makers and academics in bank concentration and competition and the role of the state in competition policies and regulations (policies and laws that affect the market structure and degree of competition). It is important to not only make sure that banking sector is competitive, transparent and efficient, but also stable. The purpose of the study was to investigate and analyze the degree of concentration in Estonian banking market and its impact on competition and market structure of financial markets over the period of 2013-2017. Both the structural and the non-structural measurement approaches of concentration and competition, along with the desk research, a case study and interviews with the financial sector professionals and an independent expert was employed to address research purpose. The findings of the study indicate that, in the Post-Soviet and nowadays EU member country – Estonia, high concentration coexist with the high and moderate competition levels and relationship between concentration and stability seems to be positive, meaning that high concentration results high stability of this banking market. The monopolistically competitive Baltic banking market is based on the contestable market equilibrium as banking sector is prone to the existence of high segmentation and product differentiation. Large banks with high share of foreign capital operate as universal banks, providing various services to the different market segments at very competitive rates, while smaller banks concentrate on a specific range of services. The Scandinavian-connected banking system of EU member Baltic country is modern and efficient, with best-regulation and high level of transparency in the region.Estonian financial markets are bank dominated, characterized with monopolistic banking structure, with leading roles of a few universal profile banking institutions, dominating not only banking sector, but whole financial market.

Sentiment-Driven Merger Waves

In this study, we examine the link between the industry-specific optimism and the formation of merger waves as well as the impact of firm-specific optimism on mergers’ value destruction. Mergers and acquisitions are among the most frequently exercised strategic decisions, often occurring in waves. The extant literature draws on neo-classical or behavioral theory to explain the formation of merger waves. The neo-classical theory fails to fully explain post-merger waves value destruction. A void filled by the behavioral theory drawing primarily on the overvaluation concept and principally neglecting the function of sentiment, as a critical component, in the formation of merger waves and the post-wave value destruction. Through large-scale textual analysis of news releases, this study provides direct evidence that industry-specific optimism plays a pivotal role in the formation of merger waves. Further, we demonstrate that firm-specific optimism, fostered by industry-specific optimism, creates managerial overconfidence, leading to significant value destruction. Our research sheds new light on why merger waves occur and why merger waves result in inadvertent outcomes.