Int. J. of Entrepreneurship and Innovation Management   »   2011 Vol.14, No.2/3



Title: Theory and evidence on mergers and acquisitions by small and medium enterprises


Author: Utz Weitzel, Killian J. McCarthy


Utrecht University School of Economics, Janskerkhof 12, 3512 BL Utrecht, The Netherlands; Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group, Kahlaische Strasse 10, 07745 Jena, Germany.
Rijksuniversiteit Groningen, School of Economics and Business, P.O. Box 800, 9700 AV Groningen, The Netherlands


Abstract: The theory of mergers and acquisitions (M&As) has been developed almost exclusively from the study of large deals by large firms. In this paper, we argue that the behaviour and success of M&As by small and medium sized enterprises (SMEs) may be significantly different. Accordingly, we revisit established M&A theories and develop a theoretical framework and several testable hypotheses, regarding the distinctive features of SME M&As. Our empirical results support our expectations and show that, compared to large firms, acquiring SMEs rely more intensively on external growth via M&As, are more likely to be withdrawn, suggesting that SMEs are more flexible and more able to avoid deals that turn sour. Finally, SME M&As are more likely to be financed with equity rather than debt, indicating that the influential financial pecking order theory is of less relevance to SMEs.


Keywords: mergers; acquisitions; small and medium-sized enterprises; SMEs; large firms; external growth; flexibility; business deals; equity; debt; pecking order theory; USA; United States; Western Europe; entrepreneurship; innovation management; entrepreneurial finance.


DOI: 10.1504/IJEIM.2011.041734


Int. J. of Entrepreneurship and Innovation Management, 2011 Vol.14, No.2/3, pp.248 - 275


Available online: 02 Aug 2011



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