Browsing by Subject "Mergers and acquisitions"

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    Enterprise Systems and Mergers and Acquisitions
    (2017-07) Cao, Chengxin
    This dissertation studies the impact of enterprise systems on mergers and acquisitions. The first chapter examines the relationship between Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and Supply Chain Management (SCM) systems and mergers and acquisitions (M&A). It also investigates how these relationships are contingent on the characteristics of the focal firm and its industry environment. The key argument is that since enterprise systems can reduce agency cost associated with internal coordination and the transaction cost of coordinating with customers and suppliers, enterprise systems may be related with horizontal, vertical and conglomerate M&A. Using a sample of 707 Fortune 1000 firms that made 1,973 M&A deals from 2009 to 2014, the empirical analysis suggests that ERP systems are positively related with horizontal and conglomerate acquisitions, more so for larger firms; CRM systems are negatively related with vertical M&A, especially when downstream industry dynamism is low; and SCM systems are negatively related with vertical M&A, particularly when supplier industry concentration is low. The second chapter examines the impact of enterprise systems (ES) of both the acquiring and target firms’ on the premium and the capital market reaction of mergers and acquisitions (M&A). The results that the extensiveness and standardization of ES are significantly associated with both market value enhancement of the acquirer as well as high market valuation for the target highlights the important role information systems play in the creation as well as the deployment of firm resources and capabilities that deliver competitive advantages to firms. Also, the availability of reliable and current information from multiple functional groups and business units that can be easily consolidated for decision making, and the availability of tools for financial modeling and simulations of different scenarios, enables senior executives to make informed and evidence based decisions in key aspects of M&A such as target choice and target firm valuation. This enables the acquirers to accurately assess the unique synergy that can be realized in the acquisition, thus preventing the acquirer from overpaying for the acquisition.
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    Essays in intangible capital reallocation, mergers and acquisitions and financial frictions
    (2013-08) Barlas, Mirza Jahiz
    This dissertation consists of three essays. In the first essay, I document novel empirical facts at the aggregate and the firm level on the reallocation of tangible and intangible capital. First, at the aggregate level, I interpret firm physical capital sales data as tangible capital reallocation and data on mergers and acquisitions (M\&As) data on intangible capital reallocation. I document the cyclicality patterns of the reallocation of both forms of capital. I show that in recessions, the correlation of intangible capital reallocation with GDP is greater than the correlation of tangible capital reallocation with GDP but in booms, the correlation of both types of capital reallocation with GDP are the same. I interpret this result as suggestive evidence that tangible capital serves a collateral motive which intangible capital does not since in recessions, firms choose to reallocate intangible capital over tangible. I also show that in the last decade the correlation of tangible capital reallocation with GDP has decreased to a quarter of its 1980s level. However, the correlation of intangible capital reallocation with GDP has remained the same in the last decade as in the 1980s. This result indicates that tangible capital collateralizability has become more important over time. Both these results show the distinctive cyclicality of the reallocation of both forms of capital. Second, at the firm level, I use data on M\&As to document the effects of capital reallocation on firm productivity and the importance of including intangible capital when evaluating the effects of capital reallocation. I document that after an M\&A, acquirer's structurally estimated productivity increases on average 4\% annually, and this productivity is 45\% higher when intangible capital is excluded from the estimation. This serves as evidence that capital reallocation is beneficial for the acquirers and intangible capital reallocation can account for measured productivity gains. In the second essay, I contribute to the recent macroeconomics literature on financial frictions at a theoretical and a quantitative level. This literature attempts to quantify the magnitude of output fluctuations attributable to financial market disturbances through frictions on the reallocation of capital among firms. At the theoretical level, I build a model in which heterogeneous firms use two forms of capital, tangible and intangible capital, to produce output. These firms are subject to idiosyncratic productivity shocks. I assume that only tangible capital is collateralizable and that both forms of capital are reallocatable across firms post-shock. I show that a financial market disturbance in the form of a tighter collateral constraint leads to a decline in output in the model with both forms of capital that is 2.8 times greater than the decline in output in the model with only tangible capital, in the sense, allowing for intangible capital magnifies the effects of financial market disturbances on output. A tighter collateral constraint causes tangible capital reallocation to decline sharply because firms are more constrained and leads to a fall in intangible capital reallocation because both types of capital are complementary in production. In the third essay, I present novel empirical observations about mergers and acquisitions. I show that acquirer productivity increases after an merger or an acquisition and that these the ex-post productivity gains are an inverse function of the productivity difference between the acquirer and target at the time of the merger or an acquisition. I also note that the higher the ex-post productivity gains for an acquirer, the bigger the decline in acquirer announcement returns and smaller the increase in target announcement returns. Lastly, I show that the executive compensation increase does not account for most of the ex-post productivity gains. These findings show that gains after a merger or an acquisition are not accruing towards shareholders or executives. Thus, I find suggestive evidence that labor obtains the most benefit associated with a merger or an acquisition in the form of increased wages and benefits.