Mergers and Acquisitions: A Global View

Abstract

Many theories have been offered to explain why mergers and acquisitions (M&As) occur. Efficiency theories suggest that mergers occur to exploit economies of scale or synergies. Market power theories argue that consoli-dation creates oligopoly benefits. Agency theories suggest that mergers and acquisitions may solve agency problems by acting as a mechanism to remove ineffective managers or, alternatively, that mergers and acqui-sitions may be a manifestation of agency problems with managers making unwise acquisitions as a result of hubris or empire-building motives. Benefits from diver-sification or tax considerations have also been suggested as a motive for M&A activity. Although no single cohesive theory of mergers and acquisi-tion has been developed, most of these theories have received at least some empirical support.