Theoretical background

DAX and M&A success


Advantages of anticyclical behavior

Disadvantages of procyclical behavior

· Lower absolute purchase price

· Information hypothesis

· Low interest on borrowed capital ® leverage hypothesis

· First mover advantage

· Purchasing companies have more bargaining power in relation to the transaction premium because of the lower level of bidding competition ® “winner’s curse” hypothesis

· More pressure on target companies to act because of competition or financial difficulties

· Detailed due diligence

· Higher absolute purchase price

· “Herd behavior”

· Inflated transactions premiums because of higher demand for target companies

· Greater use of shares as a transaction currency because of information asymmetries (signaling effect) ® information hypothesis

· A lack of due diligence