Review of Literature Linking Corporate Performance to Mergers and Acquisitions

Abstract

There are inconclusive results on the literature on the consequences of mergers and acquisitions (M&A) on corporate performance as well as factors that might affect such identify synergies. This paper aims at synthesizing and analyzing prior literature of mergers and acquisitions and its effects on the financial performance in an attempt to determine factors that might influence post-mergers and acquisitions performance. Previous studies are using varieties of measures to examine the impact of M&A on corporate performance, where measures might be accounting measures-based, market measures-based, mixed measures, or qualitative measures-based. This study concluded that there is a dispute regarding the factors that affect the reported performance, where eight factors might affect performance as follows: (1) method of payment (Cash or Stock), (2) book to market ratio, (3) type of merger or acquisition transaction (related or unrelated), (4) cross-border versus domestic M&A, (5) mergers versus tender offers, (6) firm size, (7) macro economic conditions, and (8) time period of transaction. Managers should be aware of such factors and their impact on post-merger/acquisition corporate performance to accurately evaluate proposed offers of mergers and acquisitions and take sound decisions.

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