{"title":"Acquiring Growth","authors":"Oliver Levine","doi":"10.2139/ssrn.1928255","DOIUrl":null,"url":null,"abstract":"I develop a model of mergers in which M&A deals are used to reallocate investment opportunities. In equilibrium, acquirers lack internal growth options and seek out projects from targets in the M&A market. The model is able to reconcile many features of the merger data that I document, including the high productivity, investment, and valuation of target firms. Furthermore, in my model, profitability is highly predictive of acquisition, and merger transactions naturally lead to a substantial drop in profitability despite creating value for the acquirer.","PeriodicalId":307682,"journal":{"name":"Midwest Finance Association 2012 Annual Meeting (Archive)","volume":"128 4","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2017-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"46","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Midwest Finance Association 2012 Annual Meeting (Archive)","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.1928255","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 46
Abstract
I develop a model of mergers in which M&A deals are used to reallocate investment opportunities. In equilibrium, acquirers lack internal growth options and seek out projects from targets in the M&A market. The model is able to reconcile many features of the merger data that I document, including the high productivity, investment, and valuation of target firms. Furthermore, in my model, profitability is highly predictive of acquisition, and merger transactions naturally lead to a substantial drop in profitability despite creating value for the acquirer.
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