Predicting acquirers of US food and agribusiness firms

Abstract

AbstractTo fill an important gap in the literature on acquirer prediction, this paper investigates which factors contribute to the likelihood that a firm will choose to acquire a target company from the United States (US) food and agribusiness industry (FABI). It relies on existing literature and a conceptual model in identifying the determinants of the choice to be an acquirer. Rejecting the pooled ordinary least squares and random‐effects models, the paper estimates a fixed‐effects logistic regression model based on panel data on acquirers and nonacquirers of US FABI (USFABI) target companies. Contrary to the study's various hypotheses, the results suggest that (1) efficiency, profitability, and liquidity do not affect the likelihood of being an acquirer, but that (2) less‐solvent, less‐leveraged, and less‐attractive firms are more likely to become acquirers (possibly to improve their solvency, profitability, and attractiveness). These contradictory results are attributed to the uniqueness of the USFABI sector. The mergers and acquisitions process may therefore be a way for acquirers of USFABI firms to strengthen themselves, not necessarily an expression of their financial strength. This analysis is useful to target companies, acquirers, transaction advisers, investors, regulators, and other merger and acquisition stakeholders. [EconLit Citations: D22, G24, G34, L66, Q14].