TY  - JOUR
AU  - Maksimovic,Vojislav
AU  - Phillips,Gordon
AU  - Prabhala,N. R.
TI  - Post-Merger Restructuring and the Boundaries of the Firm
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14291
PY  - 2008
Y2  - August 2008
UR  - http://www.nber.org/papers/w14291
L1  - http://www.nber.org/papers/w14291.pdf
N1  - Author contact info:
Vojislav Maksimovic
R.H. Smith School of Business
University of Maryland
Room 4417, Van Munching Hall
College Park, MD 20742
E-Mail: vmax@rhsmith.umd.edu

Gordon M. Phillips
Marshall School of Business
University of Southern California
Citigroup Center
Los Angeles, CA 90089
Tel: 213/740-0038
E-Mail: Gordon.Phillips@marshall.usc.edu

Nagpurnanand R. Prabhala
R.H. Smith School of Business
University of Maryland
4427 Van Munching Hall
College Park, MD 20742
Tel: 301-405-2165
E-Mail: prabhala@umd.edu
AB  - Mergers and acquisitions are a fast way for a firm to grow. Using plant-level data, we examine how firms redraw their boundaries after acquisitions. We find that there is a large amount of restructuring in a short period following mergers. Acquirers sell 27% and close 19% of acquired plants within three years of the acquisition. Plants in the target's peripheral divisions, especially in industries in which asset values are increasing, and in industries in which the acquirer does not have a comparative advantage, are more likely to be sold by the acquirer. Acquirers with skill in running their peripheral divisions tend to retain more acquired plants. Plants retained by acquirers increase in productivity whereas sold plants do not. The extent of post-merger restructuring activities and their cross-sectional variation do not support an empire building explanation for mergers. Acquirers readjust their firm boundaries in ways that are consistent with the exploitation of their comparative advantage across industries.
ER  -