Successful vs. failed transactions: Are the looser of today the winner of tomorrow?

Seminar paper from the year 2005 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, European Business School - International University Schloß Reichartshausen Oestrich-Winkel, language: English, abstract: If the market for mergers and acquisitions is observed over the last few decades, it is quite impressive by what amounts the number and dollar volume of takeovers have increased year by year.1 Although the rapid development has ceased over the past years, it is evident that mergers and acquisitions still play an important role in shaping the business landscape. In contrast, however, the benefits which are supposed to be generated by those takeovers are not that obvious. The topic of takeovers which turn out to be negative for shareholders is common and widely discussed in the financial business press. In spite of this fact, it is far less known what actually happens later on to those companies that realize one or more of these ¿bad¿ acquisitions. Observing these underperforming companies over time, it is disclosed that many of these ¿losers¿ become takeover targets themselves afterwards.2 Hence, it seems to be the case that the takeover of the value destructing company is related to or a consequence of the previously made transactions. If that holds true, then it could be the case that the takeover market serves as a means to discipline inefficient managers for their underperformance. [...] 1 See Appendix I. 2 This assumption will be discussed more thoroughly in section 3.2. It relates to findings of the field study that was carried out by Mitchell and Lehn. See MITCHELL/LEHN (1990), p. 37.