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Cross-Industry M&A and Target Output: Impact on Acquirors’ Performance

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New Perspectives and Paradigms in Applied Economics and Business (ICAEB 2023)

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Abstract

Mergers and acquisitions (M&A) are highly significant economic activities. Despite the hundreds of academic studies investigating firm performance around and after an M&A, the targets’ characteristics which influence the consequences of a deal are still not well understood. Using OLS and double fixed effects models, we find that there are significant differences between acquirors and targets. Specifically, the acquirors’ earnings before interest, number of employees, PPE (property, plant and equipment) and sales/turnover are all significantly higher than those of the target. Besides, we also find that the size of the acquiror increases significantly after M&A. Most importantly, the cross-industry and output per capita of the targets affect the post-acquisition performance of acquirors significantly. Our study highlights the importance of target choice and M&A decision.

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Notes

  1. 1.

    Earnings Before Interest, Tax, Depreciation and Amortization.

  2. 2.

    The numbers of employees.

  3. 3.

    The total plant and equipment.

  4. 4.

    The sales divided by turnover.

  5. 5.

    The mean value of the variable Size1 is 5.062724 (untabulated).

  6. 6.

    The mean value of the variable Size2 is 14.76271 (untabulated).

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Author information

Authors and Affiliations

  1. Shanghai, China

    Yiyan Hu

  2. University of Connecticut Storrs, 2016-2098 Hillside Rd, Mansfield, 06269, CT, USA

    Yiyan Hu

Authors
  1. Yiyan Hu
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Correspondence to Yiyan Hu .

Editor information

Editors and Affiliations

  1. Department of Applied Economics, University of Minnesota, Saint Paul, MN, USA

    William C. Gartner

Appendix

Appendix

Variable Definition

Variable

Definition

Dependent Variables

Size1

Calculated by the logarithm of Property, Plant and Equipment

Size2

Calculated by the number of employees in the company

Performance

Acquirors’ performance, calculated by the logarithm of sales

Independent Variables

Same_ind

A dummy variable equals 1 if the acquiror and the target are in the same industry, and 0 otherwise

Output1

Calculated as earnings before interest divided by the number of employees in the company

Output2

Calculated as the company's sales divided by the number of employees

HighTech

A dummy variable equals 1 if the target is in the high-tech industry, and 0 otherwise

Control Variables

Acquiror_emp

The numbers of employees of acquirors

Acquiror_ppegt

The plant and equipment total (gross) of acquirors

Acquiror_sales

The sales divided by turnover of acquirors

Acquiror_sic

The sic digital (traditional industry classifications) of acquirors

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Hu, Y. (2024). Cross-Industry M&A and Target Output: Impact on Acquirors’ Performance. In: Gartner, W.C. (eds) New Perspectives and Paradigms in Applied Economics and Business. ICAEB 2023. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-031-49951-7_14

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