Seminar: An Anatomy of Industry Merger Waves – Dott. Daniele Bianchi

11 aprile 2016 – 14.30 / 17.00  – Daniele Bianchi & Carlo Chiarella

An Anatomy of Industry Merger Waves

Abstract

We propose a novel Markov regime-switching Poisson regression model with endogenous transi- tion distributions to test existing theories on determinants of wave-like patterns in same-industry merger and acquisitions (M&As). We show that the dynamics and persistence of merger waves change substantially in the cross section of deals flow. Valuations and stock returns significantly drive transitions towards periods of abnormally high merger activity for most industries. Ex- cept few nuances, industry-specific economic shocks do not sensibly determine waves in market transactions. Also, the empirical analysis demonstrates that deteriorating aggregate economic and credit conditions are expected to be associated with declining M&A activity across indus- tries.

Keywords: M&A, Poisson Regressions, Markov Regime-Switching, Time-Varying Probabili- ties, Discrete-Choice Models, MCMC

JEL codes: G34, C11, C22, C24, C58