Payment Methods in Mergers and Acquisitions: A Theoretical Framework

Abstract

Purpose: This paper aims to review the prior literature on payment methods in Mergers and Acquisitions (M&As) and summarizing its effects on the performance of companies involved in M&As. This study also attempts to find out various determinants of the payment methods of M&As that affects the decision of payment methods in M&As.
Methodology: To carry out the analysis, this study focuses the past literature relating to payment methods in M&As and summarizes the positive and negative effects of different payment methods. The review is carried out by dividing into four parts (i) Literature studies on cash payment method (ii) Literature studies on stock payment method (iii) Literature studies on mixed payment and (iv) Determinants of payment methods. The paper investigates based on the findings of the major studies.
Research limitations: The scope of the study is confined to the contemporary review of M&As literature than the empirical survey. The study is focused more on giving suggestions for future work on M&As than providing conclusion.
Research Implications: The knowledge gained from this study will help managers from both acquirer and target companies for selection of appropriate payment methods and improve their investment mechanism and strengthen their finances by value creation in M&As.
Originality: To the authors’ knowledge this paper is the first attempt to document for summarizing the impact of different payment methods and its determinants of performance of M&As deals.