Exam 4: Merger Strategy

Varaiya found:

The process of consolidation of fragmented industries is referred to as:

Wachovia's acquisition of Golden West Financial provided significant economies of scope which enabled the bank to show steady profits even during the subprime crisis.

Both Eckbo and Stillman found:

Schipper and Thompson found positive stock market announcement effects from diversification acquisition programs in the 1960s.

United Airlines was finally able to realize synergies when they acquired travel-related businesses such as hotels and car rental companies.

Haywood and Hambrick found:

The Merck-Medco deal is an example of related diversification.

United Airlines' merger with Continental Airlines is an example of:

Markides and Oyon found positive announcement effects for acquisitions by U.S.firms of:

Vivendi under Meissier is a good example of a hubris-related M&A program.

With respect to diversification programs, Berger and Ofek found:

Doukas and Travlos found that, unlike many domestic acquisitions, acquirers enjoyed positive (although not statistically significant)) returns when they acquired targets in countries in which they did not previously have operations.

Which motives are often cited as reasons for M&As?

Improved R&D is a common motive for deals in the airline industry.

Mitchell and Lehn found that bad bidders are more likely to become takeover targets.

Cybo-Ottone and Murgia found positive abnormal returns for European bank merger announcements.

Revenue enhancing synergies are more difficult to achieve than cost economies

Bradley, Desai, and Kim found:

Research shows that for companies that often acquire other companies there is: