Post by Cornell University

In the U.S., unlike elsewhere in the world, the vast majority of mergers and acquisitions are conducted by “serial acquirers” – large, publicly traded firms that regularly acquire smaller companies. In fact, around four in five M&A deals are made by these major players. And even the least successful U.S. acquirers in terms of market reaction will continue to make deals, persisting in spite of less-than-stellar announcement day returns. This persistence is different from what we see for mergers and acquisitions outside the U.S. Possible reasons for that distinction: a special focus on technology; the appeal of “intangible assets” in the marketplace; and the strength of governance systems in U.S. financial markets compared to other parts of the world. “Why is governance so important? Maybe it’s because the system allows you to have poorly performing serial acquirers continue acquiring – it’s sort of a crucible that allows these poor performers to persist longer than they would otherwise,” said Andrew Karolyi, the Charles Field Knight Dean of the Cornell SC Johnson College of Business and a co-author of the study.