Is Merger a Good Choice? Identifying Factors that Influence Decisions

Mergers and Acquisition have become a routine affair in the Corporate World. The most recent announcement by Microsoft and its acquisition of Activision Blizzard has been a case in Point. By looking at the recent mergers (past 10 years) and selecting a sample (66) of publicly traded companies we tried to identify the key determinants of such M & A decisions. We posit that the decision to Merge or Acquire can be captured in a simple Binary Logistic model. Our results show that Market Cap; Earnings per Share and the domicile of the Corporation (US or outside) are key determining factors for the decision to merge or acquire. Policy implications suggest that corporations review all the financials, particularly the earnings per share and the market caps very carefully before taking the final decision.