Valuation Shocks and M&A Activities

How do singular landmark M&A deals with seemingly excessive valuation and high public visibility influence M&A markets? We analyze how M&A market activity and deal characteristics behave in the presence of these landmark deals. Our results show that both valuation levels and M&A activity are significantly influenced by these deals in the cross-section and over time: misvaluation and deal activity increase, while M&A premia decrease. Although the effect is especially strong in the short- and medium-term for the industries in which the landmark deals occur, our results also show spillover effects into other industries. The occurrence of the landmark deals itself is not driven by M&A activity, as perhaps suggested by M&A wave theories