Successful vs. failed transactions

Seminar paper from the year 2005 in the subject Business economics - Banking Stock Exchanges Insurance Accounting grade: 13 European Business School - International University Schloß Reichartshausen Oestrich-Winkel language: English abstract: If the market for mergers and acquisitions is observed over the last few decades it is quite impressive by what amounts the number and dollar volume of takeovers have increased year by year.1 Although the rapid development has ceased over the past years it is evident that mergers and acquisitions still play an important role in shaping the business landscape. In contrast however the benefits which are supposed to be generated by those takeovers are not that obvious. The topic of takeovers which turn out to be negative for shareholders is common and widely discussed in the financial business press. In spite of this fact it is far less known what actually happens later on to those companies that realize one or more of these 'bad' acquisitions.Observing these underperforming companies over time it is disclosed that many of these 'losers' become takeover targets themselves afterwards.2 Hence it seems to be the case that the takeover of the value destructing company is related to or a consequence of the previously made transactions. If that holds true then it could be the case that the takeover market serves as a means to discipline inefficient managers for their underperformance.[...]1 See Appendix I.2 This assumption will be discussed more thoroughly in section 3.2. It relates to findings of the field study that was carried out by Mitchell and Lehn. See MITCHELL/LEHN (1990) p. 37.