The Effect of Acquirer's Life Cycle Stage on the Performance of Mergers and Acquisitions: Evidence from Mega and Non-mega Deals in US

The paper focuses on the impact of the fact whether merger and acquisition (M&A) deal is a mega one (priced over $1bln) or not on the effect of acquirer’s corporate life cycle stage on the performance of M&A deals. The research is motivated by the increasing academic interest to the corporate life cycle concept and to the differences between mega and non-mega deals. Corporate life cycle concept proposes that the life cycle stage dramatically influences all company’s strategic decisions while decision to be engaged in M&A deal is a crucial issue. By analyzing the sample of 2 413 US domestic deals announced between 2003 and 2017 we provide evidence for the impact of the fact whether a deal is a mega one or not on the effect of acquirer’s corporate life cycle stage on the performance of M&As. No such evidence was provided previously in this field of research. We find that cumulative abnormal returns decrease on average with the lifecycle of an organization, what is in line with previous studies. As for mega deals separately, only introduction stage is a significant determinant of M&A performance – companies at introduction stage achieve lower returns while engaged in mega deals. In case of non-mega deals, the findings are opposite: growth and maturity lifecycle stages positively affect M&A performance. Separate analysis of mega and non-mega deals divides findings retrieved from the full sample into two opposite effects, what proves the necessity to differentiate between mega and non-mega M&As while analyzing the relationship between acquirer’s corporate life cycle stage and M&A performance.