Selection, valuation and performance assessment: Are these truly inter-linked within the M&A transactions?

Abstract

Merger and Acquisitions have been on the rise since the last three decades and as such have attracted considerable attention from the research community. Conclusions drawn by the existing studies indicate that such transactions do not result in a better performance, they erode acquiring firm's shareholders value, and also produce highly volatile market returns. A number of studies have analysed reasons for such inefficiencies and pointed out to several factors behind them. However, to the best of our knowledge, very little attention has been given to the business evaluation process as an influencing factor. Therefore, by providing a holistic view, the aim of this work is to investigate how the components involved in the business evaluation process influence the outcome of Merger and Acquisitions. Overall, the findings reveal that strictly controlled and inter-linked components relating to the business evaluation process have a significant impact on the outcome of the cross-border transactions. Further, the results also point out that if the selection and assessment of target firms is improved, the Merger and Acquisition results will be better.