Rising Metropoli: The Geography of Mergers and Acquisitions in Germany

Abstract

High levels of mergers and acquisitions (M&As) were a characteristic of the global economy in the 1990s. The overall effects of M&As on economic welfare and their spatial implications, however, remain a profoundly neglected topic. Using three standardised indices representing the relative quantity of take-overs in each German Regierungsbezirk, the paper demonstrates that the recent wave of M&As has resulted in a major concentration of firms and economic activity in the main German metropoli. The paper then turns to a study of the flows of M&A transactions. By means of regression analysis, it identifies the main drivers of the geographical concentration of firms to be indicators of the general level of agglomeration (i.e. regional GDP and population) and the concentration of political power in the region. The results also indicate that investment in R&D, the general level of education, or unemployment, when considered in combination with agglomeration indicators, play a negligible role in determining M&A flows. With respect to the geographical distance between a merging or acquiring firm and its target, the results are twofold. While, when considered on its own, distance has a very weak or—depending on cases—insignificant association with the territorial distribution of M&A activity, when estimated in conjunction with agglomeration, proximity appears to play a distinctive role in the geography of M&As in Germany.