Theory and evidence on mergers and acquisitions by small and medium enterprises
by Utz Weitzel, Killian J. McCarthy
International Journal of Entrepreneurship and Innovation Management (IJEIM), Vol. 14, No. 2/3, 2011

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that, compared to large firms, acquiring SMEs rely more intensively on external growth via M&As, are more likely to be withdrawn, suggesting that SMEs are more flexible and more able to avoid deals that turn sour.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.

Online publication date: Tue, 30-Sep-2014

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