MERGERS AND PROFITABILITY: A MANAGERIAL SUCCESS STORY?*

Hilary Ingham · Ingvild Kran · Andre Lovestam

67 citations0/0 files storedJournal of Management Studies

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Corporate Finance and Governance International Business and FDI Merger and Competition Analysis

Abstract

ABSTRACT Since 1983 expenditure on acquisitions in the UK has more than doubled in real terms, despite the fact that the consensus of opinion in the academic literature is that acquisitions are not, on average, performance enhancing for the acquiring firm. Such literature, however, relates mainly to the acquisition of large, public companies. Drawing on survey evidence from 146 of the UK's top 500 companies, this article reports the results from a survey which encompasses all takeovers. The study revealed that is the expected reward of increased profitabililty which is used in ex‐post evaluation. The major finding of the study is, however, that managers firmly perceive that their takeover activity has been performance enhancing for their company. The evidence presented does suggest that the integration of small acquisitions into an existing organizational structure may be achieved without severe problems of loss of control, and the subsequent decline in performance which beset large acquisitions

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References

1976Educational Organizations as Loosely Coupled Systems 1978Vertical Integration, Appropriable Rents, and the Competitive Contracting Process 1983The market for corporate control 1986The Hubris Hypothesis of Corporate Takeovers 1964The Economic Theory of ‘Managerial’ Capitalism 1988The Market for Corporate Control: The Empirical Evidence Since 1980 1987Mergers, sell-offs, and economic efficiency 1960Business Behavior, Value and Growth.

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