Abstract

Prior studies have basically reported that acquirers significantly under-perform in the long-term post-merger period. Many theories exist regarding the motivation towards the initiation of a takeover. This study intends to study three major merger motivations separately and examine the performance of the firm over a long-horizon period. Bidders and targets are identified from a sample of completed UK takeovers between the period 1990 and 1998 that accurately reflect a specific merger motive. The findings show that the performance in the post-merger period is not necessarily negative as generally found in prior studies but depends on the main driving force behind the takeover. The conclusions presented in this paper add new evidence to the post-merger dilemma by postulating that the underlying motives behind the takeover is related to the performance of the bidder over the long-horizon.