Theoretical background

DAX and M&A activity


Exogenous and endogenous determining factors:

· Positive expectations for the future

· Increasing cash flows

· High liquidity

· Favorable credit terms

Capital market theory’s approach:

· Inefficient capital market

· Assumption that managers behave rationally

· Relative overvaluation of the purchasing companies

· Overvaluation of synergies

Industrial economic-strategic approach:

· “Herd behavior”

· M&A activity is the sequential-rational result of a series of M&A decisions

· Assumption of future possibilities for value enhancement

Neoclassical approach:

· Real option model

· Game theory