Strategic motives underlying M and A transactions in the United States public construction industry

As waves of Mergers and Acquisitions (M&A) have swept over U.S. industrial business organizations, construction firms have been caught in the middle of the resulting turbulence. Nonetheless, no research has investigated these significant events in the construction industry. Under the premise that the shareholders are true owners of a contemporary publicly held company, any strategic implementation of a firm such as an M&A transaction should benefit the owners accordingly. Further, the implementation of a superior strategy is vital to excellent firm performance and therefore to a competitive position. While emphasizing the importance of a firm's strategy throughout this study, the research focuses on two specific strategic issues: (1)  The overall success level of construction M&A transactions. The research findings, which were drawn from an analysis of 171 construction M&A transactions, indicate that the performance of construction M&A was positive at an insignificant level as measured by both equity market returns and post-operating performance. The findings of improvement in post-operating performance imply that the expected synergistic gains did not materialize. (2)  The relationship between the type of diversification strategy and performance . While the related diversification strategy has been slightly favored by both theories and empirical research findings over unrelated diversification, no significant performance difference was observed between two diversification strategies. In addition to the above two issues, the research findings also indicate that the management of public construction firms has tended to increase firm size measured as sales volume and the number of employees while the operating performance did not improve much. The observed relationship between firm size change and operating performance improvement supports the management wealth maximization theory. Finally, the construction equity market has been highly effective in forecasting actual post-operating performance at the time of M&A transactions. From an academic perspective, it is hoped that this small but rigorous study will be a catalyst for subsequent strategic related research in the construction industry. From a practical perspective, it is anticipated that the research findings of this study will increase understanding of the mechanism of M&A transactions and thus improve the performance of future M&A transactions.