Is M&A success decided before the deal goes through?

Abstract: The aim of this paper is to contribute to the ongoing discussion about M&A performance and the impact pre-merger characteristics have on post-merger performance for the acquiring firm. The study is limited to acquisition deals that occurred in 2014 and the acquiring firm being located in the EU-15 area. Using the quantitative indicators method, econometric models were performed to measure the impact of nine separate accounting-based factors on post-merger performance. This thesis suggests a new method of using the performance measure return on assets. Instead of having a fixed time period used for all deals, using a five year average ROA reduces time dependent fluctuations and allows for different post-merger integration time frames. The results present us with insights that support that R&D intensity has a positive effect on post-acquisition performance, in particular for cross-industry deals. Furthermore, log revenue and inventory intensity seem to have negative and significant effects on predicted performance, even when controlling for industry, country, cross-border and cross-industry deals. Interaction variables also implies that larger acquirer firms tend to perform worse in cross-industry deals and that high R&D intensity leads to better cross-border post-acquisition performance.