Geographic Clustering : Does Local M&A Activity Affect a Firm's Acquisitiveness?

We explore geographic clustering across economic areas and local influences in M&A activity. Our analyses show there is local concentration in M&A deal activity across industries and time throughout the sample period of 35 years. We uncover a strong positive association between aggregate levels of local deal activity and local valuation measures and find that firm-level acquisitiveness is associated with local valuation levels and local deal activity outside their own industry. Our results are driven primarily by stock acquisitions and hold for both related and unrelated deals as well as for deals within and across geographic areas. Our results suggest that local (over) valuation waves best explain geographic clustering in M&A. We find no support that industry shocks or endogenous social interactions among local firms explain geographic clustering in M&A