The Impact of Acquisitions on Company Performance: Evidence from a Large Panel of UK Firms.

This paper investigates the impact of acquisitions on company performance using a large panel of U.K.-quoted companies observed over a long time period. The results indicate that acquisitions have a detrimental impact on company performance and that company growth through acquisition yields a lower rate of return than growth through internal investment. Given the penchant for takeovers in the United Kingdom, as witnessed by the record level of takeovers on the London equity market last year, the authors' findings suggest that neither firms nor shareholders are being best served by the existing financial and industrial system. Copyright 1997 by Royal Economic Society.