The prediction of takeover targets in UK

Abstract

The aim of this thesis is to identify the financial characteristics of takeover targets in UK for the period 1982-1990. An examination of the financial characteristics of the target firms may bring about an immediate recognition of the motives of takeover activity. The present study attempts to identify the financial characteristics of takeover target firms both at an economy wide level and at an industrial level.

The thesis has been motivated primarily by the fact that there is no comprehensive study examining mergers and acquisitions in the UK in the 1980s and particularly within an industrial classification framework.

The present thesis provides a comprehensive study of merger and acquisition activity for the UK over the period 1982-1990. The sample selected includes an initial population of 314 target firms, 603 bidder firms and a sample of 236 non- target firms matched by industry with the target firms. The basic methodology is logit analysis.

The novelty of the economy wide study of mergers and acquisitions is as follows: the use of multivariate logit for a study of the UK, the separation of the data into distinct estimation (1982-1985) and validation (1986-1990) periods and the binomial choice problem is differentiated into bidders versus targets and non targets versus targets.

The industry by industry study examines the following sectors: chemicals, construction, food, electrical and electronics engineering and mechanical engineering. The present thesis suggests that the financial characteristics of target firms vary between different industries.