Motives for Mergers and Acquisitions: Ex-Post Market Evidence from the US

Despite extensive research, merger motivation is largely inconclusive. Incomparable methodologies further exacerbate debates in the extant literature. This study uses a recently developed technique to examine post-acquisition evidence as to the motives behind merger and acquisition activity. Using a sample of 3,520 domestic acquisitions in the United States, we find that 73% are related to market timing; 59% are related to agency motives and/or hubris; and 3% are responses to industry and economic shocks. Our results also show that about 80% of the mergers in our sample involved multiple motives. Thus, in general it is very difficult to have a clear picture of merger motivation because value-increasing and value-decreasing motives may coexist.