The Perfect Match: Assortative Matching in Mergers and Acquisitions

DEPARTEMENT ECONOMIE ET SCIENCES DE LA DECISION

Intervenant :  Maria GUADALUPE (INSEAD)

HEC Campus- Building T - Room T004

Abstract :

This paper studies the motives behind corporate mergers in developed countries. Using data for the five largest European countries, we characterize each firm by its productivity and market size before the merger. Then, using new empirical matching techniques that allow for matching along multiple discrete and continuous dimensions, we estimate whether there are complementarities between these dimensions. We find very strong positive assortative matching on productivity and also on size, and no complementarity across these two characteristics. Complementarities are similar in magnitude for related and unrelated mergers, and for domestic and cross-border mergers. We also follow merged firms to see how the evolution in their productivity and size depends on the characteristics of the initial merger. Overall, our results suggest that existing theories of mergers are generally not able to account for the dominant observed empirical patterns in these data.