MERGERS AND ACQUISITIONS
LITERATURE REVIEW

LUKE WALTON

Table of Contents
Abstract 3
Introduction 3 Background and motivation 3 Objective or aim of this literature review 4 Findings from current available literature 4 Issues from current research 5 Contribution to current literature and stakeholders 5
Section One 6 Motivation of M&A’s 6 Synergy 6 Agency theory 7 Hubris 7 Relationship between motives and financing 8
Section Two 9 Payment methods 9 Financing hierarchy vs. market conditions 9 Differing views on leverage 10 Valuation and the agency problem 10 Managerial ownership 11
Section Three 12 Performance of mergers and acquisitions 12 Performance indicators 12 Methodology 13 Profitability 13 Performance due to the motivation 14
Conclusion 15 Summary and findings 15 Areas of future research 17 Qualitative research in M&A’s 17 Decision making process for methods of payment 17 Unified methodology in determining M&A performance 17
References 19
Abstract
Mergers and acquisitions have become a common practice for firms as a mean to expand and increase profitability. Existing evidence is still unable to strongly determine what factors make a successful M&A due to inconsistency in data and findings. This paper aims to provide an insight to the steps included in the M&A process by comparing existing literature and hopes to suggest key determinants of a successful M&A transaction. Evidence shows that not all acquisitions are motivated by synergy. It is argued that motive can be known by comparing the chosen payment methods and performance.
Introduction
Background and motivation
Last 20 years have witnessed a rapid increase in the amounts of Mergers and Acquisitions (hereafter referred to as M&A’s) conducted worldwide. As shown in the graph below, the value of total M&A’s has