Mergers and acquisitions in the U.S. agribusiness sector, 1990–2017

Abstract The study examines financial and transaction characteristics that influence mergers and acquisitions (M&A) in U.S. agribusinesses. During the M&A private phase, we model the likelihood of firms becoming bidders or targets as a function of firms' past financial performance. During the M&A public phase, the likelihood of bidders becoming acquirers is modeled as a function of firms' past financial performance and M&A transaction characteristics. The results for the subset of bidders in the M&A private phase suggest that the likelihood of a firm becoming a bidder is positively correlated with the bidder's firm size 1 year before the M&A announcement. In contrast, the likelihood of a firm becoming a bidder is negatively associated with bidder's leverage, cash level, and very low market valuations. For the subset of targeted firms, the likelihood of firms being targeted is positively associated with the firm's leverage and negatively related with its profitability. Our results for the M&A public phase model show that firm experience in the M&A market is positively associated with the likelihood of acquisition completion. In addition, relative to nonhorizontal transactions, horizontal mergers tend to be more difficult to complete. [EconLit Citations: G34, M2].