2007-2009 Bear Market and Corporate Takeovers

Mergers and acquisitions (M&A) are among the most popular research topics in finance. The synergistic benefits of and the market reaction to mergers have been studied extensively. However, the impact of financial/economic crises on M&A activities has not been studied sufficiently. In this empirical study, we make a contribution on this subject by studying the financial characteristics of acquisition targets in the U.S. before, during, and after the October 9, 2007-March 9, 2009 bear market. The MANOVA (multivariate analysis of variance) test statistics indicate that the overall financial characteristics of the acquired firms were not significantly different from the financial characteristics of the non-acquired control group firms during the bear market and immediately before and after the bear market. However, we find that the acquiring firms preferred targets with significantly higher total assets turnover ratios before the bear market, with significantly higher inventory turnover ratios during the bear market, and with significantly lower capital expenditure ratios after the bear market.