Are Mergers Beneficial or Detrimental? Evidence from Advertising Agencies1

Julian Simon, Manouchehr Mokhtari and Daniel Simon

International Journal of the Economics of Business, 1996, vol. 3, issue 1, 69-82

Abstract: We study 33 pairs of advertising agencies that merged between 1947 and 1985, comparing each merging pair against two controls: (a) a pair of agencies with combined merger-date billings close to the total billings of the merged unit, and (b) a single agency with similar total merger-date billings. Gross revenues are the dependent variable. Results: Merging firms do worse in the short run than controls. Assuming similar subsequent rates of growth for merging and non-merging firms, a loss of 16 percent of firm value due to merging is implied.

Keywords: mergers; advertising agencies JEL classification: L10 (search for similar items in EconPapers)
Date: 1996
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DOI: 10.1080/758533489

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