How Foreign Competition Affects Corporate Acquisitions

Following the Great Recession, low interest rates coupled with high levels of cash reserves propelled companies to grow through mergers and acquisitions rather than organically through capital investments. The year 2015 saw a record number of M&A deals totaling $4.9 trillion.

Firms merge for a variety of sound reasons, such as to create synergies, to consolidate in response to industry shocks like deregulation, to deal with increased competition, or to take advantage of developments in how acquisitions are financed. But companies also merge for more questionable reasons: because an overconfident chief executive overestimates a target firm’s value or seeks to … Read more