Skip to main content

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

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.

This is a preview of subscription content, access via your institution.

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.

References

  • Agrawal, A., & Jaffe, J. F. (2000). The post-merger performance puzzle. In C. Cooper & A. Gregory (Eds.), Advances in mergers and acquisitions (pp. 1–42). Stamford, CT: JAI Press.

    Google Scholar 

  • Agrawal, A., Jaffe, J. F., & Mandelker, G. N. (1992). The post-merger performance of acquiring firms: A re-examination of an anomaly. The Journal of Finance, 47(4), 1605–1621.

    Article  Google Scholar 

  • Bertrand, O. (2009). Effects of foreign acquisitions on R&D activity: Evidence from firm-level data for France. Research Policy, 38(6), 1021–1031.

    Article  Google Scholar 

  • Bertrand, O., & Zuniga, M. (2006). R&D and M&A: Are cross-border M&A different? An investigation on OECD countries. International Journal of Industrial Organization, 24(2), 401–423.

    Article  Google Scholar 

  • Bild, M. (1998). Valuation of takeovers. Stockholm: Economic Research Institute at the Stockholm School of Economics.

    Google Scholar 

  • Capron, L. (1999). The long-term performance of horizontal acquisitions. Strategic Management Journal, 20(11), 987–1018.

    Article  Google Scholar 

  • Capron, L., Mitchell, W., & Swaminathan, A. (2001). Asset divestiture following horizontal acquisitions: A dynamic view. Strategic Management Journal, 22(9), 817–844.

    Article  Google Scholar 

  • Cartwright, S., & Cooper, C. L. (1996). Managing mergers, acquisitions and strategic alliances: Integrating people and cultures. Oxford: Butterworth-Heinemann.

    Google Scholar 

  • Cassiman, B., Colombo, M. G., Garrone, P., & Veugelers, R. (2005). The impact of M&A on the R&D process: An empirical analysis of the role of technological- and market-relatedness. Research Policy, 34(2), 195–220.

    Article  Google Scholar 

  • Cloodt, M., Hagedoorn, J., & Van Kranenburg, H. (2006). Mergers and acquisitions: Their effect on the innovative performance of companies in high-tech industries. Research Policy, 35, 642–654.

    Article  Google Scholar 

  • Datta, D. K. (1991). Organizational fit and acquisition performance: Effects of post-acquisition integration. Strategic Management Journal, 12(4), 281–297.

    Article  Google Scholar 

  • Dutta, S., & Jog, V. (2009). The long-term performance of acquiring firms: A re-examination of an anomaly. Journal of Banking and Finance, 33(8), 1400–1412.

    Article  Google Scholar 

  • Gugler, K., Mueller, D. C., & Weichselbauer, M. (2012). The determinants of merger waves: An international perspective. International Journal of Industrial Organization, 30, 1–15.

    Article  Google Scholar 

  • Harrison, J. S., Hitt, M. A., Hoskisson, R. E., & Ireland, R. D. (1991). Synergies and post-acquisition performance: Differences and similarities in resource allocations. Journal of Management, 17(1), 173–190.

    Article  Google Scholar 

  • Hitt, M. A., Harrison, J. S., & Ireland, R. D. (2001). Mergers and acquisitions: A guide to creating value for shareholders. Oxford: Oxford University Press.

    Google Scholar 

  • Jensen, M. (1986). Agency costs of free cash flow, corporate finance and takeovers. American Economic Review, 76(2), 323–329.

    Google Scholar 

  • Kaplan, S. N. (2000). Mergers and productivity. Chicago: University of Chicago Press.

    Book  Google Scholar 

  • King, D. R., Dalton, D. R., Daily, C. M., & Covin, J. G. (2004). Meta-analyses of post-acquisition performance: Indications of unidentified moderators. Strategic Management Journal, 25(2), 187–200.

    Article  Google Scholar 

  • Laabs, J. P., & Schiereck, D. (2010). The long-term success of M&A in the automotive supply industry: Determinants of capital market performance. Journal of Economics and Finance, 34(1), 61–88.

    Article  Google Scholar 

  • Larsson, R., & Finkelstein, S. (1999). Integrating strategic, organizational and human resource perspectives on mergers and acquisitions: A case survey of synergy realization. Organization Science, 10(1), 1–26.

    Article  Google Scholar 

  • Long, W. F., & Ravenscraft, D. J. (1993). LBOs, debt and R&D intensity. Strategic Management Journal, 14(1), 119–135.

    Article  Google Scholar 

  • Lubatkin, M. (1983). Mergers and the performance of the acquiring firm. The Academy of Management Review, 8(2), 218–225.

    Google Scholar 

  • Martynova, M., & Renneboog, L. (2008). A century of corporate takeovers: What have we learned and where do we stand? Journal of Banking and Finance, 32, 2148–2177.

    Article  Google Scholar 

  • McDonald, M. L., Westphal, J. D., & Graebner, M. E. (2008). What do they know? The effects of outside director acquisition experience on firm acquisition performance. Strategic Management Journal, 29(11), 1155–1177.

    Article  Google Scholar 

  • Meglio, O., & Risberg, A. (2011). The (mis)measurement of M&A performance—A systematic narrative literature review. Scandinavian Journal of Management, 27(4), 418–433.

    Article  Google Scholar 

  • Seth, A. (1990). Value creation in acquisitions: A re-examination of performance issues. Strategic Management Journal, 11(2), 99–115.

    Article  Google Scholar 

  • Sharma, D. S., & Ho, J. (2002). The impact of acquisitions on operating performance: Some Australian evidence. Journal of Business Finance and Accounting, 29(1), 155–200.

    Article  Google Scholar 

  • Singh, H., & Montgomery, C. A. (1987). Corporate acquisition strategies and economic performance. Strategic Management Journal, 8(4), 377–386.

    Article  Google Scholar 

  • Stahl, G. K., & Voigt, A. (2004). Impact of cultural differences on merger and acquisition performance a critical research review and integrative model. Advances in Mergers and Acquisitions, 4, 51–82.

    Google Scholar 

  • Teerikangas, S., & Very, P. (2006). The culture-performance relationship in M&A: From yes/no to how. British Journal of Management, 17(1), S31–S48.

    Article  Google Scholar 

  • Veugelers, R. (2005). M&A and innovation: A literature review. In B. Cassiman & M. Colombo (Eds.), Mergers and acquisitions: The innovation impact (pp. 37–62). Cheltenham: Edward Elgar.

    Google Scholar 

  • Weitzel, U., & McCarthy, K. J. (2011). Theory and evidence on mergers and acquisitions by small and medium Enterprises. International Journal of Entrepreneurship and Innovation Management, 14(2/3), 248–275.

    Article  Google Scholar 

Download references

Acknowledgments

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

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Spyros Arvanitis.

Appendix

Appendix

See Tables 8, 9, 10, 11 and 12.

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

Rights and permissions

Reprints and Permissions

About this article

Cite this article

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

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11187-013-9482-z

Keywords

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

JEL classifications

  • L20
  • O31
  • L26