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How Swiss small and medium-sized firms assess the performance impact of mergers and acquisitions

Small Business Economics volume 42, pages 339–360 (2014)Cite this article

Abstract

While previous studies on mergers and acquisitions (M&As) mostly relied on large firms, our study is based on a sample that includes all Swiss M&As that took place in the period 2006–2008, mostly of which have been SMEs. We investigate the firm characteristics that determine the innovation and economic performance of M&As. The performance measures are based on firms’ assessments. These measures are regressed on a series of possible determining factors as postulated in existing theoretical and empirical literature. M&A performance is primarily affected by specific M&A characteristics, but not by general market characteristics such as demand development or competition conditions. Rather astonishingly, it is also not affected by firm characteristics such as capital intensity, human capital endowment and firm size. There is an interesting exception: innovation activities. This means that, with the remarkable exception of innovation activities, the level of M&A performance is determined primarily by factors of the M&A process itself.

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Notes

  1. The questionnaire is available in German and French on www.kof.ethz.ch/en/surveys/.

  2. The M&A took place in the period 2006–2008, our survey at the beginning of 2011 and was referring to firm activities until the end of 2010. Given that M&As were (almost) equally distributed in the period 2006–2008, the assessments of the impact of M&As refer on average to about 3.5 years after M&A. We assume that 3.5 years would be sufficient adaptation time for SMEs.

  3. One may argue that a simple addition of the sales (or market shares) of the acquiring and the acquired firm would always lead to an increase of the sales (or market share) from the point of view of the acquiring firm, even without any synergy effects. Of course we cannot exclude this case. But the findings do not seem to show in this direction: a significant share of the acquiring firms reported no impact or even decrease (market share: 46 %; sales: 36 %; see Table 2). Similar considerations apply also to the indicators for innovation performance.

  4. We have also tested alternative dependent variables that allow distinguishing different levels of performance effects (ordinal overall variables). However, the respective ordered probit estimates differ only marginally from the probit estimates based on the binary variables and yielded no additional insights.

  5. We also estimated a bivariate model for economic performance (after dropping the variable “innovation activities”) and innovation performance in order to capture the effects of interdependence between these variables possibly driven by some unobserved heterogeneity, as a referee suggested. The results were practically the same as in the separate probit estimates presented in Table 5 so we refrain from presenting them here.

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Acknowledgments

The fruitful comments and suggestions of two anonymous referees are gratefully acknowledged.

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Authors and Affiliations

  1. KOF Swiss Economic Institute, ETH Zurich, 8092, Zurich, Switzerland

    Spyros Arvanitis & Tobias Stucki

Authors
  1. Spyros Arvanitis
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  2. Tobias Stucki
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Correspondence to Spyros Arvanitis.

Appendix

Appendix

See Tables 8, 9, 10, 11 and 12.

Table 8 Descriptive statistics based on ‘basic model’
Full size table
Table 9 Correlation matrix (based on ‘basic model’ of the economic performance equation; n = 318)
Full size table
Table 10 Probit estimates of M&A performance for different size classes; basic model (average marginal effects)
Full size table
Table 11 Principal components factor analysis of motives for M&A (rotated factor loadings; pattern matrix); significant results in bold
Full size table
Table 12 Principal components factor analysis of M&A obstacles (rotated factor loadings; pattern matrix); significant results in bold
Full size table

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Arvanitis, S., Stucki, T. How Swiss small and medium-sized firms assess the performance impact of mergers and acquisitions. Small Bus Econ 42, 339–360 (2014). https://doi.org/10.1007/s11187-013-9482-z

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Keywords

  • Mergers and acquisitions
  • Economic performance
  • Innovation performance
  • Micro-data

JEL classifications

  • L20
  • O31
  • L26