Australian mergers and acquisitions since the 1980s: what do we know and what remains to be done?

This article presents a survey which cover subsequent published work on the Australian merger and acquisition market. Studies were grouped by their relevance to factors that motivates merger & acquisition activity, how are gains and losses distributed among acquiring and target firms, and what is the impact of takeover regulation on the distribution of gains and losses. The aim is to provide a guide to current knowledge that will be useful to both industry participants and prospective researchers in the area of merger and acquisition. In answer to what motivates merger and acquisition activities, it was concluded that acquisitions are initiated by higher-performing firms seeking to extend their relatively good performance. Share-market event studies consistently find that bidding firms experience good performance in the months prior to the takeover announcement. It was found that one potential reason that target firms under-perform is that their management is not subject to effective oversight by shareholders, perhaps because the shareholders are widely dispersed and individually lack the incentive to expend effort on monitoring. Although the share price performance of acquirers around the bid period is difficult to reconcile with the value-increasing hypothesis, this is not so for corporate raiders' that is, persons or companies with a reputation for frequently engaging takeover bids.