CROSS - INDUSTRY MERGERS AND ACQUISITIONS: SMART OR SENSELESS?

Open Access
Author:
Greenspan, Ani
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Robert Alexander Novack, Thesis Supervisor
  • Brian Spangler Davis, Honors Advisor
Keywords:
  • Mergers
  • Acquitisions
  • M&A
  • Diversified
  • Cross-Industry
Abstract:
Businesses have strategically decided to use Mergers & Acquisitions (M&A) in order to increase firm value since the beginning of U.S. history. While some companies choose to acquire competitors or other companies along their supply chain, others choose a different route and deliberately merge with or acquire companies that are in a completely different industry. This study analyzed three different ‘cross-industry’ M&A deals in U.S. history using a range of dimensions set forth. Ultimately, this study aims to determine whether or not ‘cross-industry’ mergers and acquisitions hold value. Taking into account the value creation or destruction of the deal will help in determining if these deals are ‘smart or senseless.’ Results of the study suggest that there is no one definitive answer to this question. While there are circumstances that promote this type of transaction, in many cases two companies in different industries joining together will create unanticipated problems, and eventually lead to disassembly.