A Balance Model for Evaluating Firms for Acquisition

Vithala R. Rao, Vijay Mahajan and Nikhil P. Varaiya
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Vithala R. Rao: Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853
Vijay Mahajan: Graduate School of Business, University of Texas, Austin, Texas 78712
Nikhil P. Varaiya: College of Business Administration, San Diego State University, San Diego, California 92182

Management Science, 1991, vol. 37, issue 3, 331-349

Abstract: In recent years, the U.S. corporate world has been dominated by a spectacular spate of mergers and acquisitions. Firms are seeking out partners that will provide them the necessary leverage to achieve their various growth and diversification goals. Based on the balance model developed by Farquhar and Rao, this paper suggests a multi-attribute approach for evaluating acquisition partners. The appropriateness of this approach in the decision of one firm to acquire another firm is investigated using experimental methods. The context of the cosmetic industry is used in this empirical application. Results indicate that the balance model is quite suitable in describing the acquisition decision.

Keywords: acquisition models; balance model; multiattribute models (search for similar items in EconPapers)
Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:37:y:1991:i:3:p:331-349

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