Regression and Forecast of M&A Transactions in the UK Essay

Regression and Forecast of M&A Transactions in the UK - Essay Example111). notwithstanding the many benefits that accrue to acquisition as a crop st valuegy, the is significant diversity in the rate of acquisitions surrounded by different countries and different regions from across the world. The consequent disparity in the worlds acquisitions has necessitated the investigating into the predictors of this variable in this study, and hence its choice as the dependent variable. Beckeinsten examined the acquisition of firms based on the micro- economic factors that sour acquisition behaviors (26). In his study, economic indicators such as GDP growth, interest rates and communication channel trade index were tested through a series methodology. His findings were that acquisition activity inversely correlate with economic growth. In view of the findings from different empirical studies with respect to the potential predictors of acquisitions, it is crystal clear that the relation ship between acquisition activities and the tested economic indicators is not only mixed but also unpredictable. The complexity, therefore, behind fortune telling of acquisition activities inspired the researcher of this study to investigate it further. . Figure 1 Rate of acquisition growth (1970-2012) the dependent variable. (Data obtained from U.K office of national statistics) Figure 1 shows the graph of acquisition growth rate from 1970 to 2012. ... The thrive of acquisitions is characterized by ups and downs, a splashn that can be associated with economic cyclical patterns. If we can attribute this patter to economic cyclical patterns, then it seems there were major recessions in 1975, 1992 and 2010 and major expansions during 1973, 1978, 1988, 1994, 1999 and 2005. During an economic expansion, the rate of growth of acquisitions seems to increase significantly while the opposite happens during economic recessions. To link these economic cycles to the earlier discussed macroe conomic variables that is, inventorying price, market price and GDP, it can be argued that all the three variables move in a collateral bang with economic expansion as well as in a positive direction with economic recession. During the time of economic expansion, the wealth of the shareholders tends to grow hence stimulating acquisitions. Increased level of economic activities is also expected to boost GDP growth rate, which sends positive signal to companies encouraging them to merge. Furthermore, changes in stock prices affect the financial abilities of companies hence encouraging or discouraging them to merge. During the late 1980s the acquisitions seem to make flourished significantly due to the possible economic boom and a surge in the stock market. Nevertheless, the patterns exhibited in this graph are highly unpredictable and it would be of interest for economist to examine if there is a possibility of negatively linking these waves to important financial activities, whic h can raise concern over the negative impacts of acquisitions on the economy. Part II Equation Acquisition_growth = growth_of_market_value + growth_of_ordinary_share price + growth_of_gdp + c Discussion of the model Gross