Determinants of Mergers and Acquisitions: Evidence from the Insurance Industry

This paper fills a gap in the existent literature on the determinants associated with the likelihood of being involved in mergers and acquisitions (M&As) by insurance firms. We investigate firm factors for both becoming a target or becoming an acquirer using a detailed database of the Spanish insurance industry over the period 2000-2012. The period encompasses the years of the global wave of M&As in the 2000s and the recent financial crisis. Results indicate that value-enhancing strategies have been the main motivations for M&As, since the increase of performance in terms of scale and allocative efficiency are principal reasons to be involved as acquirers and insurers are more likely to be targets if they are less profitable and have higher premium growth rates. We also find that insurer ownership type matters to be involved in M&As and this finding does not necessarily have to be explained by managerial entrenchment arguments. Results also show variations among different ownership types concerning the influence of the product diversification determinant on the probability to become acquirers.