Determinants of Acquisition and Failure

This chapter is an extended and adapted version of Köke (2001b). It examines the determinants of acquisition and failure of German corporations. Both issues have recently attracted the increased attention of researchers and policy makers alike. In Germany, but also in other continental European countries the number of insolvencies continued to rise or stagnated at high levels. At the same time, in the past decade we have seen an upsurge in merger and acquisitions activity, both within and across the borders. In Germany and in other continental European countries, hostile takeovers are rare (Franks and Mayer, 1998). But as shown in Chapter 4, similarly to the US block trades occur more frequently than tender offers. Especially German policy makers often argue that acquisitions occur to the disadvantage of shareholders and other stakeholders. A recent example is the takeover of Mannesmann by the British telecom company Vodafone that provoked intense discussions on the merits of acquisitions.