Merger and Acquisition

and how it goes about


Scroll down below to see the steps.

Step 1

  1. Check for the profile of CEO, CFO, & COO turnover, and board members (Check HomRoy Paper)
  • M&A increase the hazard of CEO turnover
  • CEOs face a higher hazard of turnover which may indicate the effect of SOX Sarbanes-Oxley act of 2002(SOX) in intensifying the monitoring of corporate governance
  • The dynamics of M&A between small and large firms are different; indicating ownership structure of the firm has a significant effect on firm performance and post-M&A CEO exit

Step 2

2. Define the industry characteristics of the firm under the M&A process

  • A target company’s very senior top managers are likely to turn over more quickly than their colleagues of somewhat lesser rank
  • A target company’s top management turnover rate is likely to be higher following a related merger or acquisition than following an unrelated merger or acquisition
  • Top management turnover rates following an M&A are significantly higher than normal top management turnover rates in non-merged firms

Step 3

3. Check the number and major or larger shareholdersàcompute the diversification index and compare the index between the firms’ competitors

  • The existence of these dual shareholders decreases bidder returns, increases target returns, and increases the probability of diversifying mergers
  • Dual owners carry out mergers without any positive synergies
  • The dual owners do not make pecuniary gains; this may suggest that the mergers must be motivated by other objectives.