Analytical Perspectives on Mergers and Acquisitions: A Survey

Abstract

The aim of this paper is to supply the reader with a survey of the most widely debated issues related to mergers and acquisitions. We review the existing theoretical and empirical literature on the causes and consequences of mergers. The bulk of the empirical evidence on the profitability of mergers and on the stock performance of the merging partners shows that mergers are usually unprofitable and that the only group who stand to profit from a merger are the shareholders of the acquired company. This evidence has prompted a variety of theoretical explanations to be put forward as to why mergers occur. We provide a systematic review of such theories. We also analyse the related issue of the consequences of mergers on economic welfare, and review both theories and the empirical work on this issue.