Characteristics of Mergers and Aquisitions by Small Manufacturing Firms
While acquisitions by large firms receive a great deal of media and researcher attention, acquisitions by small firms tend to be overlooked. This study compares a sample of M&As by small U.S. manufacturing firms that occurred between 1992 and 1999 with a sample of M&As conducted by large U.S. manufacturing firms that occurred during the same period Characteristics examined include the type of transaction, the type of ownership of the target firm and the relationship between the target and acquirer's primary products and geographic locations. Results indicate that many small firms are active acquirers and are involved in a wide range of M&A activities that are often quite similar to that undertaken by large firms. There are, however, several important differences. Small firms are found to be more likely to purchase privately held targets and to make acquisitions of targets that were primarily involved in industries outside of manufacturing. Large acquirers are more likely to make acquisitions of partial interest in a target and to make cross-border transactions. Implications for researchers and practitioners are discussed.
Beal, R. M. (2000, January). Competing effectively: Environmental scanning, compettt1ve strategy, and organizational performance in small manufacturing firms. Journal of Small Business Managemen 38, 27-4 7.
Brown, M. M., & Ridley, G. (1994). Privatization-current issues. London: Graham & Trotman.
Cannella, A. A., & Hambrick, D. C. ( 1993, Summer). Effects of executive depanures on the performance of acquired firms. Strategic Management Journal. 14, 137-152.
Chatterjee, S. ( 1986, March/April). Types of synergy and economic value. Strategic Management Journal, 7, 1 19-140.
Clemente, M. N., & Greenspan, D.S. (1998). Winning at mergers and acquisitions: The guide to market focused planning and integration. New York: John Wiley & Sons.
Cole, R. A., & Wolken, J. D. (1995, July). Financial services used by small businesses: Evidence from the 1993 national survey of small business finances. Federal Reserve Bulletin, 81, 629-667.
Delano, D. (2000, February). Manufacturers add capacity, increase productivity. Modem Materials Handling, 55, 15.
Deshpande, S. P., & Golhar, D. (1994, April). HRM practices in large and small manufacturing firms: A comparative study. Journal of Small Business Management, 32, 49-56.
Economic Report of the President (2000). Washington D.C.: United States Government Printing Office.
Fouts, D. L. (1997). Stock verses asset sales: Pros and cons for buyer and seller. In T. L. West & J. D. Jones (Eds.), Mergers and acquisitions handbook for small and midsize companies, 234-251. New York: John Wiley & Sons.
Elgers, P. T., & Clark, J. J. (1980, Summer). Merger types and shareholder returns: Additional evidence.Financial Management, 9, 66-72.
Feinberg, P. (2000). Minority shareholders fight the governance battle. Pensions & Investments, 28(11), 14-16.
Flanagan, D. J., & Deshpande, S. P. (1996, October). Top management's perceptions of changes in HRM practices after union elections in small firms. Journal of Small Business Management, 34, 23-34.
Flanagan, D. J., D'Mello, J. P., & O'Shaughnessy, K.C. (1998, Summer). Completing the deal: Determinants of successful tender offers. Journal of Applied Business Research, 14, 21-32.
Fowler, K. L., & Schmidt, D. R. (1988, December). Tender offers, acquisitions, and subsequent performance in manufacturing firms. Academy of Management Journal, 31, 962-974.
Galpin, T. J., & Herndon, M. (2000). The complete guide to mergers and acquisitions: Process tools to support M&A integration at every level. San Francisco, CA: Jossey-Bass.
Gaughan, P. A. (1999). Mergers, acquisitions and corporate restructuring (2nd ed.). New York: John Wiley & Sons.
Goodman, A. L., & Scanlon, M. J. (2001). Survey of audit committee charters and audit committee reports in 2001 proxy statements. Insights; the corporate & securities law advisor, 15, 13-18.
Haunschild, P. R. (1994). How much is a company worth? lnterorganizational relationships, uncertainty,and acquisition premiums. Administrative Sciences Quarterly, 39, 391-411.
Hayward, M. L., & Hambrick, D. C. (1997, March). Explaining the premium paid for large acquisitions: Evidence of CEO hubris. Administrative Sciences Quarterly, 42, I 03-127.
Hitt, M. A., Hoskisson, R. E., Ireland, D. R., & Harrison J. S. (1991, September). Effects of acquisitions on R&D inputs and outputs. Academy of Management Journal, 34, 693-706.
Hooke, J. C. (1996). M&A: A practical guide to doing the deal. New York: John Wiley & Sons. How to protect against misuse of business ownership (2001). Business Owner, 25(5), 7-9.
Jarrell, G. A., & Poulsen, A. B. (1989, Autumn). The returns to acquiring firms in tender offers: Evidence from three decades. Financial Management, 18, 12-19.
Kathawala, Y., Judd, R., Monipallil, M., & Weinrich, M. (1989, January). Exporting practices and problems of Illinois firms. Journal of Small Business Management, 27, 53-59.
Lubatkin, M. H. & Lane, P. J. (1996, February). Psst... The merger mavens still have it wrong! Academy of Management Executive, 10, 21-39.
Lubatkin, M. H., Srinivasan, N., & Merchant, H. (1997). Merger strategies and shareholder value during times ofrelaxed antitrust enforcement: The case oflarge mergers during the 1980s'. Journal of Management, 23(1), 59-81.
Malone, S. C. (1989, September). Characteristics of smaller company leveraged buyouts. Journal of Business Venturing,4, 349-359.
Maquieira, C. P., Megginson, W. L. & Nai l, L. ( 1 998, April). Wealth creation versus wealth redistributions in pure stock-for-stock mergers. Journal of financial Economics, 48, 3-33.
Marren, J. H. ( 1993). Mergers and acquisit ions: A val uation handbook. Homewood, I L: Business One Irwin.
Mitchell, M. L & Mulherin, H. J. (1996, June). The impact of industry shocks on takeover and restructuring activity. Journal of financial Econom ics, 4, 193-229.
Morck, R., Sh leifer, A., & Vishny, R. W. (1990, March). Do managerial objectives drive bad acquisitions? Journal of Finance, 45, 31-48.
Morris, J. M. (1995). Mergers and acq uisitions: Business strategies for accountants. New York: John Wiley & Sons.
Newton, S (1994, June). New relief for m inority shareholders. Nation's Business, 82, 66.
Odell, H. R. (1977, July). Coping with assim ilation costs in small firm acqu isitions. Journal of Small Business Management, 1 5, 33-36.
O'Shaughnessy, K C & Flanagan D. J. (1998, October). Determinants of layoff announcements following M&As: An em pirical investigation. Strategic Management Journal, 1 9, 989-999.
Panchak, P. (1999, October). Fate of a nation. lndustrv Week, 248, 90-98.
Pelham, A. M. (2000, January). Market orientation and other potential influences on performance in small and medium-sized manufacturing firms. Journal of Small Business Management, 38, 48-67.
Poner, M E. (1987, May/Jun). From competitive advantage to corporate strategy. Harvard Business Review, 65, 43-59.
Reed, S. F. & Lajoux A. R. (1998). The an of M&A: A merger/acquisition buyout guide (3rd ed.). New York: McGraw-Hill.
Sherman, A. J. (1998). Mergers and acquisitions from A to Z : Strategic and practical gu idance for small and middle-market buyers and sellers. New York: Amacom.
Silverman, M. & Castaldi, R. M. ( 1992, April). Antecedents and propensity for diversification: A focus on small banks. Journal of Small Business Management, 30, 42-52. ·
Singh, H. & Montgomery, C. A. (1987, July/August). Corporate acquisitions and econom ic performance. Strategic Management Journal, 8, 377-386.
Sirower, M. (1997). The synergy trap: How com pan ies lose the acqu isition game. New York: The Free Press.
Standard Industrial Classification Manual. (1987). Washington, D.C., Office of Management and Budget, Executive Office of the President.
Thong, J. Y. (1999, Spring). An integrated model of information systems adoption in small businesses. Journal of Management Information Systems, 15, 187-214.
Walsh, J. P. ( 1988, March/April). Top management turnover following mergers and acquisitions. Strategic Management Journal, 9, 173-183.
West, T. L. & Jones, J. D. (Editors) (1997). Mergers and Acquisitions Handbook for Small and Midsize Com panies. New York: John Wiley & Sons.
Wolfensohn, J. (1999, February). Learning a brutal lesson. The Banker, 149, 14-15.