An approach to two-sided M&A fits based on a cross-efficiency evaluation with contrasting attitudes

Abstract

Two-sided mergers and acquisitions (M&A) fits have been regarded as a critical step, which should always be taken by a bidder company when trying to identify suitable target companies prior to an M&A. This paper proposes an approach to two-sided M&A fits based on a cross-efficiency model with contrasting attitudes. In this approach, firstly, feasible M&A fits are screened using a preference function from an M&A fit matrix, according to the preferences of both the bidder companies and target companies in terms of efficiency and return to scale. Secondly, two-sided M&A fits are selected from a feasible M&A fit matrix, according to the value of cross-efficiency with contrasting attitudes. This allows for the existence of contrasting attitudes of peers toward an M&A fit, as opposed to the aggressive, benevolent or neutral cross-efficiency evaluation which consists of just one attitude (either aggressive, benevolent or indifferent). Finally, an illustrative example is given to explain the feasibility and validity of the two-sided M&A fit strategy.

Keywords:

• two-sided mergers and acquisitions (M&A) fits
• data envelopment analysis
• cross-efficiency evaluation with contrasting attitude
• efficiency and RTS

Acknowledgements

The work described in this paper was supported by the National Natural Science Foundation of China (NSFC) under the Grant No. 71371053, 71403055; and also supported by the Humanity and Social Science Youth foundation of Ministry of Education of China under the grant No. 14YJC630056; and also supported by Project of Natural Science Foundation of Zhejiang Province under the Grant No. LY15G030021.