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Instytut Ekonomiki Rolnictwa i Gospodarki Żywnościowej – PIB Warszawa
Acceptance date: 2013-09-15
Publication date: 2013-09-15
Zagadnienia Ekonomiki Rolnej / Problems of Agricultural Economics 2013;336(3):3–24
The intensity of business merges and acquisitions changes over time. Theoretically, competitive firms constantly seek for ways to grow mainly due to expected economies of scale and scope. However, there might be other important factors, both of endogenous and exogenous nature, driving this phenomenon. In the paper we discuss various aspects of busi-ness mergers and acquisitions in the context of market concentration. We also highlight the issue of symptoms and causes of fluctuations in economic activity. Using data for the period of 2000-2012 we analyse the value of the overall business mergers and acquisitions in con-nection with the world economic growth and selected stock market indexes. Next, we focus on the world agro-food sector and test the hypothesis that the number and value of mergers and acquisitions in this sector were related to the business cycle fluctuations observed in the period of 2000-2010. Firstly, the results of our research show that both merger and acquisition transactions carried out in the agro-food sector had largely inter-branch or, at the most, inter-sectorial character. Only very rarely the firms decided to cross the sector borders, probably because of the higher business risk of taking over firms with the type of operations considerably different from the ones conducted earlier. So, such transactions lead to a higher concentration, mostly horizontal one, which can restrain the competitiveness of a branch or the sector. Secondly, a relationship between fluctuations in economic activity in the world agro-food sector and the intensity of mergers and acquisitions was found, especially regarding the value of those trans-actions. It grows together with the economic recovery, which means that mergers and acquisi-tions in the agro-food sector are procyclical, similarly to the case of the whole world economy. This means that economic recovery facilitates concentration processes. Thirdly, the observed connection between the directions of changes in the merger and acquisition activities and the changes in stock market indexes seems to be determined by the situation on the capital markets. Strong stock markets in connection with higher market value of companies creates better opportunities to finance these type of transactions becoming an important factor stimulating conclusions of them. To certain extent, this finding supports the Tobin’s Q theory.