The influence of industry concentration on Merger & Acquisition decisions

Sammanfattning: While previous research has primarily focused on post-Merger & Acquisition (M&A) effects, influential factors, which trigger cross-border M&A transactions and whether the level of industry concentration play a key role in making the decision, have been largely neglected in research. This study aims to close this gap in research and investigates the influence of industry concentration on cross-border M&A decisions, including effects of profitability and corporate governance. The studied sample consists of 1105 companies across 48 countries, whereas 533 undertook cross-border M&A transactions across 40 countries. A logistic regression was used to predict the probability of cross-border M&A transactions. The study analyzed the effects on both the complete sample and on M&A companies only. The results indicate that large companies are more likely to undertake cross-border M&A with companies from a different industry in order to spread their level of risk. However, MNCs, which undertake transactions, are less likely to perform more transactions within one year. Over the time of observation the analysis revealed that market share did not change and thus, industries are not getting more concentrated in general, indicating that markets remain competitive. Multinational companies (MNCs), which have a higher market position and are more profitable, are less likely to undertake corporate restructuring, which was partially supported in this analysis. For both samples the findings do not support that the interaction between industry concentration and corporate governance have an influence on cross-border M&A. These findings increase the understanding of the role of industry concentration, profitability and corporate governance and that they do not play a crucial role in making cross-border M&A decisions.