Merger Waves in Europe - A Study of Merger Waves in Six of the Largest European Economies, and how Merger and Acquisition Transactions are Affected by Interest Rates and Inflation Levels

Abstract

The M&A market has attracted increasing interest in recent decades. Over the years, the global market has experienced several crises, including the Dot-com bubble, the Global Financial Crisis, and the COVID-19 pandemic. But how is the number of transactions affected by various economic crises, fluctuating interest rates, and inflation? This report aims to investigate whether a theory by Vazirani on merger waves holds, and how and whether the interest in M&A transactions correlates with interest rates, inflation, and significant economic events. Through public data and historical levels of interest rates and inflation, regression analysis will be used to explain if, how, and why market behavior changes during different economic events. The results show a mixed picture regarding the relationship between inflation and the number of mergers and acquisitions. Statistical significance can be found in three of the six countries for the negative relationship between interest rates and the number of M&A transactions. For all sample countries combined, the p-value of 0,08 can indicate that the negative relationship with near certainty can hold.