Drivers of Merger and Acquisition Activities in the US Market

The two ways firms can expand their business are organic growth and inorganic growth. Organic growth is based on firms’ internal investments, which aim to increase a company’s outputs and enhance its sales (Bruner, 2004). On the other hand, inorganic growth can be accomplished through investments or structuring a partnership outside the business (Bruner, 2004). A decision to grow organically or inorganically is a choice about “make” versus “buy”. There are several strategies which a company can pursue in order to grow inorganically, such as merger or acquisition, minority investment, joint venture, strategic alliance and contractual relationship (Bruner, 2004). This paper will investigate inorganic growth strategies, focusing the analysis on M&A activity, which is defined as mergers and acquisitions1 where bidders are US-based companies that acquire US or foreign target firms. Thus, the geographic area of interest is represented by the United States of America. The choice of the selected geographical area, is related to the importance of the M&A activity in the US region, which accounted for 1 trillion of USD in 2011, roughly 30 per cent of the world’s M&A volume (Qiu, 2012). As Graph 1 shows below, the Americas currently represent the biggest share of the worldwide mergers and acquisitions business (Qiu, 2012).