Purchasing reserves and commodity market timing as takeover motives in the oil and gas industry

Can broad factors such as natural resources endowment and global commodity markets influence corporate takeovers? This paper theorizes that managers are motivated in mergers and acquisitions to purchase energy reserves and to time the commodity market in the oil and gas industry. We find supportive evidence that shows that energy reserves and prices cause and affect takeover activity, value, and performance. Acquirers are motivated to purchase reserves, while targets are motivated to sell based on market timing. Acquirers have negative takeover performance from lower risk. Our conclusions are robust to the traditional explanations: equity valuation, synergy, free cash flow, equity and debt market conditions, and economic cycles. (C) 2013 Elsevier B.V. All rights reserved.