Finance RECENT TRENDS IN THE STUDY OF MERGERS AND ACQUISITIONS
FinanceRECENT TRENDS IN THE STUDYOF MERGERS AND ACQUISITIONSSorin Adrian AchimIntroductionIn the present globalized world, investments playa key role. But the international financial crisishas affected both the course of these flows andtheir intensity. Investors have reconsidered theirpositions and strategies on the market. Thereare more options for investors to place theirmoney and to develop. Out of these options, animportant part of the investment flows happensthrough mergers and acquisitions. This isnot necessarily linked to the number of suchprocesses taking place, but it is more relatedto the sums of money that are transacted inmerger and acquisition operations.As Ferreira et al [10] point out, this type ofoperations has become an important instrumentfor activity internationalization. This aspect wasemphasized in the field’s literature from thebeginning of this millennium. Consequently,different cultural, economic, social and legalenvironments meet. This is a very importantfeature of the mergers and acquisitions that,incorrectly treated, could lead to the failure ofsuch an operation.But mergers and acquisitions also takeplace at a domestic level. Regardless of thegeographical space in which they occur, thereare several goals in merging with or acquiringanother company. Some of the most importantare related to: overcoming legal barriers for enteringa national market, access to resources, cheaper work force, enforcing the position on the market, lowering competition, etc.Mergers and acquisitions are complexprocesses that, as shown earlier, need to bevery well understood and planned in order tobe successful. From here comes the needfor continuous knowledge about the field’sliterature. However, the field’s literature is wideDOI: 10.15240/tul/001/2015-1-010EM 1 2015.indd 123and a lot of time would be needed for consultingall the information on the market. As shown inthe Statistics part, when checking the Web ofKnowledge platform, more than 200 articleswere found with the specific subject of mergersand acquisitions only in 2014. To ease the workof researchers and practitioners in the field,the goal of this article is to present the latesttrends in the study of mergers and acquisitionsthrough a brief literature review of the paperspublished in 2014. This comes to complete thework of others who reviewed the mergers andacquisitions literature for different periods oftime. In this respect it is noteworthy to mentionthe work of [10] who point out the evolution ofthe subjects treated by authors in the field’sliterature. Additionally, they present the mostcited papers in order to show newcomers inthis field of mergers and acquisitions researchwhere to start from.Our study is an update of such papers,allowing for an easier approach of the latesttrends in mergers and acquisitions and theirstudy.The following part presents the methodologyused.We then present some statistics related tothe articles published on the subject of mergersand acquisitions in 2014, based on what wefound on the Web of Knowledge application. Wepoint out that most of these studies are relatedto developed economies such as the USA, theUK, Germany or China. On the 2010–2014ranking the first two developing countries thatappear in the ranking are South Korea on the12th place and Romania on the 18th. For the 2014ranking South Korea is on the 13th place andChile on the 20th. Consequently, we emphasizethe need for more studies on mergers andacquisitions related to developing economies.In both cases, most of the researches in thisfield were published in Journal of Corporate1, XVIII, 20151234.3.2015 11:42:39
FinanceFinance. Other features are assessed andpresented in this part.Some of the most important ideas foundin the field’s literature are then reviewed,summarized and briefly described in order tohelp researchers in the process of literaturereview. The emphasis is put on the bankingsector as from this started the 2008 financialcrisis and it is the most common in the latestfield’s literature.Conclusions are drawn from our analysisand the most important directions in the studyof mergers and acquisitions are emphasized.1. MethodologyTo achieve our goal we have accessed theWeb of Knowledge database and consideredall published works that satisfied the searchingkey “merger* and acquisition*”. These workswere related to the economic field. However,as we speak about latest trends in the domain,we have filtered the results based on the yearof publication, taking into consideration paperspublished in 2014.The final sample is made up of 206 scientificresearches that dealt with the issue of mergersand acquisitions in 2014 and were alreadyavailable in the Web of Knowledge database at thetime of our research. The final date for consultingthe database was November, 20th, 2014.First of all, we have descriptively analyzedthe papers using the database’s analyzingresults option. Then we have proceededin reading the papers and grouping themaccording to their main subject, in order to beable to construct a good quality review relatedto the latest trends in the field.Additionally, we have also run a resultanalysis for the articles that satisfied oursearching key, but for the 2010–2014 period.The reason is that 2010 is the year when theanalysis in the study of [10] stops and wewanted to see what happened afterwards. Inthis part of the analysis were evaluated 1595records.Several hypotheses were constructed at thebeginning of our analysis:H1: Most of the studies in this field arerelated to the developed countries.This hypothesis comes from the fact that themajor part of the research in any field is relatedto developed countries, as they have thenecessary tools for research and development.124EM 1 2015.indd 124Additionally, companies with the head quarter indeveloped countries are the ones that acquire.H2: The major part of the studies that dealwith mergers and acquisitions are publishedin Management journals, or belong to theManagement category.This assumption comes from the fact that themanagerial group of a company is the one toplan a merger or an acquisition and to conductsuch a process, both a priori and post operation,including all the negotiation discussions.Managers are appointed by shareholders torepresent their interest – profit.However, papers of this kind can also belongto the category of corporation studies, as theseare the ones that appeal to such operations.H3: An important part of the sample dealswith cross-border investigations.We base this hypothesis on the fact that crossborder mergers and acquisitions are muchmore important than the domestic ones, as theirimpact internationally is more intense.We also expect a lot of studies publishedlately to deal with: new ways of assessing the merger andacquisition process, the Euro Area crisis and its impact upon themerger and acquisition market, assessment of this issue in the bankingsector, as this was the most affected by thebankruptcy of the Lehman Brothers Bank inthe USA, and so on.The reason for choosing the Web ofKnowledge database is that it is the mostimportant one internationally. The best journalsand the best publishing houses have theirpapers gathered in this database. We have builtour study on the presumption that, who is not inthe Web of Knowledge, does not exist.2. Describing the Features of theAnalyzed SampleIn 2014, up to the moment of our analysis, 206studies satisfied the searching key “merger*and acquisition*”. In order to understand thetrends, we have chosen first to evaluate thesestudies using the “Analyze results” option of theWeb of Knowledge database.Based on these results, the first assumptionis correct – almost all the studies in this groupare related to the developed countries. The2015, XVIII, 14.3.2015 11:42:39
Financeabsolute supremacy belongs to the USA,to which are related 90 of the 206 studies,representing almost 44% of the sample. At anextremely high difference comes the UnitedKingdom, placed the second in the ranking, witha share of 13.1% (27 studies). Germany is onthe third place, with 21 papers (10.2% of thesample). The rest of the countries have relativefrequencies lower than 8%. Among them are:the Netherlands, Canada, France, China,Italy, Japan, and so on. This is an importantaspect emphasized by this research – studiesassessing the issue of mergers and acquisitionsin the developing countries are scarce. This isa negative point in the study of such processesas, usually, one of the parts is located in suchan economy. Thusly, more efforts should beFig. 1:directed towards evaluating features of mergersand acquisitions in the developing countries.An important matter is that these countriesmay be characterized by legal, social oreconomic instability, which change the typicaldevelopment of such a process.More than half of the sample (127 studies,representing 61.7%) were studies published inthe field of Economics. Thusly, from the point ofview of the category, hypothesis 2 is rejected.Studies published in the Management categorycome only on the third place as a share, afterthe ones in Business Finance, as presented inFig 1. If the category of Operations ResearchManagement Science is added to Management,it comes on the second place, with a share ofaround 38% in the volume of the sample.Bar chart of the most important categories to which the studies belongSource: own construction based on Thomson Reuters Web of Knowledge dataHypothesis 2 is accepted when assessingthe type of journal. Most of the researches in thisfield where published in 2014 in managementjournals or in the ones related to corporations orcompetitiveness. Differences in this respect arenot that significant as in the case of the othercharacteristics analyzed. Most of the studies, 9,appeared in the Journal of Corporate Finance.Then comes Journal of Competition Law andEconomics (8 papers). On the third place arefive journals, each of them with 6 articles on thissubject. These are: Strategic Management Journal, Review of Industrial Organization, Journal of Financial Economics, Journal of Finance, Journal of Banking and Finance.They are followed by other managementjournals.Hassan I. is the author with the most paperson mergers and acquisitions published in 2014.As the study of [10] stopped in 2010, wealso present a brief statistical description forthe period 2010–2014. Out of the 1595 papers1, XVIII, 2015EM 1 2015.indd 1251254.3.2015 11:42:39
Financesatisfying our searching criteria, 25% werepublished in 2011. Fig. 2 shows that there arenot important differences, except for 2014. ThisFig. 2:could come from the fact that, at the moment ofthe analysis, not all journals had their last issuepublished.Structure of the studies published on mergers and acquisitions basedon the year of publicationSource: own construction based on Thomson Reuters Web of Knowledge dataHowever, except for 2011, one can seean approximately constant number of articlespublished on this matter from 2010 towardspresent.In what regards the country to which thepaper is related, nothing changes for the firsttwo ranks. The USA is on the first place for theentire period, too. Almost 40% of the sampleis related to this country. The United Kingdomcomes the second, again, with a very lowshare in respect to the USA (almost 11%).Germany comes on the fourth place, beingreplaced by China on the third. We present thefirst 10 countries in Fig. 3. It can be seen thatthe first working hypothesis is also acceptedfor the 2010–2014 period. It is noteworthy toemphasize that there are 26 papers evaluatingthis issue in relation to Romania (it ranks 18th).126EM 1 2015.indd 126Only South Korea is to be found in more studies(42). All other developing economies are farlower in the ranking. For example Greece,which was extremely intensely affected by theglobal economic crises is to be found only onthe 25th place, with 19 studies in this field.Most of the studies were published byWeber Y. and Tarba S.Y. (each one with 10papers in this field in the analyzed period).Journal of Corporate Finance is in the topof the ranking, again, with 49 articles. Thistime, between it and the Journal of CompetitionLaw and Economics (46 papers) is placed theReview of Industrial Organization (48).In what regards the category, Managementand Business Finance switch places, with 595and 480 studies, respectively. The first remainsthe Economics category.2015, XVIII, 14.3.2015 11:42:39
FinanceFig. 3:The top 10 countries to which studies are related for the 2010–2014 periodSource: own construction based on Thomson Reuters Web of Knowledge data3. The 2014 Trends in the Study ofMergers and AcquisitionsSubsequent to reviewing the whole sample,we grouped the studies based on their mainsubject. In the following we briefly present someof the most important of our findings.After evaluating the 2014 papers, we canconclude that the third working hypothesisis accepted. Most of the studies assess thisissue from the point of view of cross-bordertransactions. A possible explanation is the factthat international transactions are of a muchmore interest than the domestic ones. Insidecountry mergers and acquisitions are of moreinterest only for the national actors on thatmarket. Consequently, in order to be publishedand cited, authors seek to choose subjects thatare of international, global relevance. Whenlooking for the “cross-border” expression in thesample analyzed, more than 30 researches werefound. This represents about 15% of the studiesreviewed. However, much more of them reallyassess this issue from an international point ofview. Few are the articles or other papers thathave the subject related to domestic mergersand acquisitions. Among them we found, forexample, the study of [25] that speaks about theproblem of local governments’ consolidation inJapan. The article points out that governmentsreceiving larger sums of money from the centerare not likely to merge. Other examples of thistype are related to the US newspaper market[16], the US banking sector [8] and so on. Wehave also found an example from a Europeancountry – the Netherlands. [4] study the spatialclustering process that appeared due tomergers and acquisitions in the Dutch bankingsector. They analyze a very long period of time,from 1850 to 1993.The field’s literature also speaks aboutmerger waves and their characteristics. Thistheory is to be found in relation to differentsectors. For example, [31] estimate a model forthe US banking sector for a large period (1987to 2013) in order to test the theory of mergerwaves and find the causes for such waves.They emphasize that these are directly relatedto stock market booms. Merger waves are alsoassessed from the point of view of connectionsand linkages between industries. The influenceof the development of the insurance marketupon the hospital merger wave in the 1990sis evaluated by [30]. Waves of consolidationare also assessed in the insurance sectoralone (see, for example, [34]). Mergers andacquisitions are expected to happen in order1, XVIII, 2015EM 1 2015.indd 1271274.3.2015 11:42:39
Financeto restructure and consolidate the Europeaninsurance sector after the harmonized SolvencyII framework that is about to be put into practice.An important study comes to emphasizethe growing significance of companies fromemerging economies in the M&A process([29]). They point out that an important featureof the present M&A wave is the influence ofemployees on the results of the process. Theseresults were obtained through a laboratoryexperiment and, beside the growing importanceof the companies’ size, they also emphasizethe increasing weight of the cultural issues inthe mergers and acquisitions. Other studiescome to point out the growing importanceof cultural-based strategies. This is a trendin the study of corporate governance. A welldeveloped cultural strategy increases the postacquisition performance and efficiency [21].Additionally, [36] stress the need for consideringcultural differences when constructing the M&Astrategies. The performance of mergers andacquisitions cannot be anymore explained ina simple manner. Another aspect treated bythis study is the importance of the managerialteam upon the M&A efficiency. [2] also assesscultural issues. Their result is that M&A successis directly related to cultural fit. A new approachis introduced by [12] – learning by observing.They show that culturally different companiescan merge or be involved in an acquisitionprocess in a more efficient way by studying theproblems encountered by their predecessorson a specific market. Problems related to spatialand cultural distance are also present in othernewly published studies (see, for example, [24]).An increasing importance is givennowadays to the evaluation of intermediariesin the mergers and acquisition processes. Themost frequently of such groups treated in thelatest literature are: Managers, Accountants and auditors, Financial advisors.Their role is very important as whatfinally counts is the performance of the M&Aprocess and the gains that this process bringsto shareholders. Performance, in general, isassessed in relation to board features (see, forexample [28]). The latest studies also evaluatethe performance of the M&As in relation to themanagers’ characteristics. For example, [17]investigate the influence of CEOs experienceupon the M&A performance. They conclude128EM 1 2015.indd 128that firms with former investment directors in themanagerial team have a higher propensity toacquire and are more efficient in this process. Onthe contrary, more traditionalist companies, withconservative managers are, are less likely to getinvolved in M&A operations [19]. This statement istrue, even though CEOs in the acquirer companyare more likely to have increased compensationsafter the acquisition [18].Financial advisors are also very important,especially when they have experience inthe target country, while the acquirer doesnot. Studies such as the one of [13] confirmthe certification hypothesis in the choice ofconsultants for cross-border M&A.Traditional companies as mentionedbefore also have conservative accountingapproaches. Consequently, more traditionalfirms from the accounting point of view aremuch more reluctant towards mergers andacquisitions. Post merger accounting issuesare also discussed in the newest literature. [6]emphasizes the difference between pre andpost transaction values of assets and evaluatesthe diversification discount. It is interestingto see how the whole process of accountingstandardization based on the IFRS has affectedM&A performance. [5] state that the mergerpremium has decreased due to internationalharmonization of reporting standards.Beside accountants, auditors also playa key role in the M&A process. This aspect isbrought into light by [23] who show a significantdecrease in the costs the acquirer has to bearwhen a Big N auditor is auditing its targetcompany. But due to increased market powerand to the Big N theory, the auditing market isalso subjected to M&As. The impact of themis assessed in the field’s literature. Studies onthis subject reject the hypothesis of marketconcentration upon auditing fees [22]; [9].3.1 The Banking SectorThe banking sector is highly assessed inmergers and acquisitions problems. Out of the206 papers in the sample, 23 deal specificallywith this sector. Consequently, more than 10%of the sample is related to the banking sector.It is no wonder that the Journal of banking andFinance is among the top in the ranking basedon the number of articles published on thesubject of mergers and acquisitions.In this group of papers appear more mergersand acquisitions related theories. There are2015, XVIII, 14.3.2015 11:42:39
Financeseveral theories related to the size of the banksinvolved, to the size of the banking sector andto changes that appear on the market once withthe consolidation through M&A. We restate thepaper of [31] that comes with an interestingtheory – “too big to merge?”.Related to it is another study that
trends in the study of mergers and acquisitions through a brief literature review of the papers published in 2014. This comes to complete the work of others who reviewed the mergers and acquisitions literature for different periods of time. In this respect it is noteworthy to mention the work of [10] who point out the evolution of
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Le genou de Lucy. Odile Jacob. 1999. Coppens Y. Pré-textes. L’homme préhistorique en morceaux. Eds Odile Jacob. 2011. Costentin J., Delaveau P. Café, thé, chocolat, les bons effets sur le cerveau et pour le corps. Editions Odile Jacob. 2010. 3 Crawford M., Marsh D. The driving force : food in human evolution and the future.
