1 Department of Business Studies, Aarhus School of Business, Aarhus BSS, Aarhus University2 Finance Research Group, Aarhus School of Business, Aarhus BSS, Aarhus University3 Department of Economics and Business Economics, Aarhus BSS, Aarhus University4 unknown5 Department of Economics and Business Economics, Aarhus BSS, Aarhus University
What drives merger waves? Harford 2005 argues that mergers are an efficient response to economic shocks to an industry, whereas Rhodes-Kropf, Robinson & Viswanathan 2005 argues that merger waves are driven by overvaluation of the acquiring firm, and to a lesser extent, the target firm. Both papers are based on empirical analyses of listed US firms. This paper presents additional evidence of merger waves in the European Union (EU). The use of European data allows a more detailed analysis, since firm level data is available for both listed as well as private transactions. This analysis reveals significant differences between driving forces for listed firms and for private firms. Public or listed firm mergers and acquisitions are primarily driven by overvaluation or behavioural factors, whereas private transactions are driven by economic factors.