Strategic Similarity in Mergers and Acquisitions

Tina Oreski
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Tina Oreski: Swiss Finance Institute

No 21-29, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Using textual analysis and the firm life-cycle theory to proxy for a company's competitive strategy, this paper empirically examines the strategic similarity hypothesis. The findings show that merger and acquisition transactions are more likely between firms with the same strategy. Moreover, when the acquirer and the target firm compete based on one strategy, the deal yields higher stock returns and stronger future asset growth. The effect is more pronounced in a highly competitive environment, consistent with the strategic misalignment acting as a constraint to the merged company's optimal response. Overall, the results reveal that synergies obtained from the overlapping strategies constitute an important determinant of public merger and acquisition deals.

Keywords: mergers and acquisitions; competitive strategy; synergies; firm life-cycle; textual analysis (search for similar items in EconPapers)
JEL-codes: G34 L21 M21 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2021-03
New Economics Papers: this item is included in nep-bec, nep-com, nep-cwa and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2129

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