Strategic Factor Markets: Expectations, Luck, and Business Strategy

Abstract Research on corporate growth through acquisitions and mergers suggests the existence of markets for buying and selling companies (Porter 1980, p. 350; Schall 1972; Mossin 1973; Copeland and Weston 1979). Most empirical evidence seems to suggest that these markets are reasonably competitive. That is, the price an acquiring firm will generally have to pay to acquire a firm in these markets is approximately equal to the discounted present value of the acquired firm (Mandelkar 1974; Halpern 1973; Ellert 1976). Indeed, if above normal returns accrue to anyone in markets for companies, research seems to suggest that they will most likely go to the stockholders of the acquired, rather than the acquiring firms (Porter 1980, p. 352; Ellert 1976).