Antecedents of growth through mergers and acquisitions: Empirical results from Belgium

This paper empirically investigates the antecedents of growth through mergers and acquisitions (M&As) in a typical continental European country, Belgium. The article reports on a study using data on 484 private and listed bidders engaging in 990 M&As during 1997-2007, and matches this sample with companies that did not pursue any external growth. By analyzing firm characteristics, industry, and aggregate financial market variables, the study can also discern the motives that are important in the decision to acquire. The results show that neither the firm's cash position nor its cash-generating abilities influence its choice to grow externally. Yet, intangible assets affect the M&A decision positively, whereas ownership concentration and bank loans have a negative effect. In industries where incumbents are operating at a lower scale and in more highly concentrated industries, the odds of firms participating in M&As are larger. Industry deregulation, industry growth, and financial market conditions have no influence. These findings are largely comparable across listed and private firms. Yet, the data do reveal that the operating scale of industry incumbents and industry concentration matter only in horizontal and domestic takeover decisions.