Business cycles and acquisition policy: Analysis of M&A deals of metallurgical companies

M. Fomin

No 6441, Working Papers from Graduate School of Management, St. Petersburg State University

Abstract: Business and management literature pointed out on the existence of business cycles and on the importance of conducting countercyclical mergers and acquisition policy. However, according to the merger wave theory in practice acquisitions are likely to be procyclical because of real and behavioral factors. The majority of empirical papers finds positive link between M&A activity and state of the cycle, suggesting that acquisitions are procyclical. This paper tests whether M&A deals of metallurgical companies in China, Russia and India are procyclical. The results show that deals are indeed procyclical, but only at a glance. Introducing intermediate state of valuation in the metal market indicates that the majority of acquisitions were made when prices where close to the neutral state. As the result, acquisition policy can be characterized as neutral to the state of the cycle.

Keywords: mergers and acquisitions; M&A; business cycle; metal prices; metallurgical industry; emerging markets (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cis and nep-mac
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