Strategic Business Cycle Management and Merger and Acquisition Patterns

Strategic business cycle management (BCM) involves exploiting movements of the economy to gain competitive advantage over rivals. BCM is applicable to mergers and acquisitions (M&A) which occur in cyclical, non-periodic waves. Acquiring targets at a wave's beginning is profitable, making waves important opportunities for value creation. Econometricians have attempted to model waves, with little consensus. Using a model-selection approach, we compare five linear and nonlinear time series models for U.S. M&A data from 1895-2008. Our results suggest that a seasonal autoregressive moving average (SARIMA) is both well-specified and parsimonious. We discuss how our study extends the prescriptive BCM research agenda