Assessing Market Attractiveness for Mergers and Acquisitions : The MARC M&A Maturity Index

This paper develops a new scoring methodology to determine a country's capability to develop and sustain mergers and acquisitions (M&A) activity on the basis of publicly available and continuously updated information. The study computes a theoretically grounded maturity index for M&A purposes (MARC M&A Maturity Index) using 36 factors in total which capture key legal, economic, financial, political, technological, and socio-cultural characteristics from a total of 175 countries based on information available at the end of 2009. The index is then used to classify different maturity stages of development in M&A activity, i.e., mature, transitional, and emerging markets. The difference in score between the stages of maturity is found to be highest for the political and technological environments, suggesting that these areas of a country's development stage are prerequisites for M&A maturity. Tests show that it is only the socio-cultural environment that acts as a determinant of M&A activity within the mature markets group, whereas the economic, financial, political, and technological environments determine differences in M&A activity amongst countries in the transitional development stage. Interestingly, political factors appear to be inversely related to M&A activity in transitional markets, while technological and socio-cultural factors seem to slightly explain the scores obtained by emerging economies