Abstract

There is an extensive literature on the determinants of the likelihood of mergers and acquisitions (M&A), however, there is limited research on how a crisis impacts the likelihood of M&A. We examine a sample of 20,076 events to investigate the direction of influence of two
distinct crises (the financial crisis and Covid-19) on the likelihood of M&A. In addition, we assess the impact of M&A likelihood on the probability of buyback announcements as buybacks can be used as a defensive strategy against M&A attempts. We find smaller firms with higher liquidity and leverage are more likely to be targeted post-crisis. Additionally, we note that while bidders were more inclined towards more profitable firms following the financial crisis, less profitable firms were more appealing acquisition candidates after the Covid-19 crisis. Tobin’s Q was not statistically significant during post-crisis periods. We find that the probability of announcing a buyback is positively related to the likelihood of being a target in the pre-crisis periods, however, this relationship disappears post-crisis. It appears that firms reassess their use of share repurchases to deter acquirers in the event of a crisis. Our robustness tests highlight the importance of studying the impact of each crisis independently and show that our findings are not driven by random variation.