Can We Predict M&A Activity?

Anticipating mergers and acquisitions (M&A) helps executives and investors to design their firms’ strategies and decide on their investments. However, a review of the literature shows that we know relatively little about the determinants of M&A activity, and that former research often falls short of theoretical foundations. Hence the question: in what conditions can we make accurate practical predictions of M&A activity? Relying on neo-institutional theory, we suggest that M&A activity gains from being predicted at national level and that its determinants tend to depend on the country under scrutiny. We also draw on economic contagion theory pertaining to linkages between national economies to identify possible foreign institutional influences on a country's M&A activity. We tested our framework in three countries, the United States, the UK, and Japan, with a prediction model based on the Kalman filter that is rarely used in the field of international business. Our findings broadly corroborate our hypotheses, show the relevance of neo-institutional theory for studying the topic, and confirm that accurate practical predictions of M&A activity can be made at national level.