Dependence of M&A Deal Performance During Merger Waves on Corporate Life Cycle

In this study, the effect of life cycle of organization on merger performance during merger waves is analyzed to determine if the stage of the acquirer has an effect on effectiveness of the deal overall and on early periods of the wave. The dependency is investigated with the help of event study framework and life cycle classification is conducted based on cash flow proxy. The results show, that overall, acquirers on introduction stage are able to realize positive returns on the announcement horizon. For the early stage of the wave, the positive effect retains for introduction firms, while it is also evident that decline stage is affecting the returns in negative way. For the long-term returns, the empirical results reveal, that for the acquirers there is positive dependency between buy-and-hold returns and growth and introduction stage of the acquirer if the deal is conducted in early stages of the wave. Overall, the results show that lifecycle has an effect on market reaction to deal announcement.