| Summary: | Takeovers occur between acquirer and target companies. Previous merger research disregards the link formed between takeover pairs.
This thesis uses a positive framework and predictive techniques to
evaluate the link between acquirers and targets. Models are
developed which use financial measures of acquirers to predict the
financial characteristics of targets. The resultant models have
three uses. (I) Significant models may be used to guide the actions
of decision makers, and increase the efficiency with which various
parties can identify abnormal gains from takeovers. (2) Results
suggest that acquirer size and leverage are important factors in the
target selection process. Results further contribute to evidence
supporting the economies of scale hypothesis, but provide evidence
which is contrary to the differential efficiency and earnings
growth hypotheses. (3) Predictive models anticipate fresh
knowledge. The use of cluster analysis identifies multiple subgroups
within each of the target and acquirer groups. However,
target and acquirer sub-groups were not associated with one
another. Further, the insignificance of most predictive models
suggests that acquirer and target groups are not linked or that
multiple links occur between groups.
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