Engineering financial distress: transplanting bankingtechniques to the NHS?

The NHS is in what appears to be an endless financial crisis. But why has the government been unable to address the problem? Geoff Meeks draws parallels between a model deployed by the banking industry and the way the NHS is financed to explain why the problem may ultimately be a political one

Who is helped by Help to Buy?

What's not to like about a policy which can expand home ownership and boost the supply of housing? Geoff Meeks and J.Gay Meeks recount some of the doubts about the efficacy of the government's Help to Buy scheme. They present new evidence on some of its regressive distributional consequences, and touch on the opportunity cost of the subsidy programme

Understanding pension obligation figures (though your boss might not want you to)

Traditionally the preserve of boring articles in arcane journals, employers’ pension obligation accounts have recently featured in headline stories in mainstream media. Geoff Meeks explains the role of these accounts in an insidious redistribution of risk and wealth between employers and employees

The curious case of bank tax since the bailout

In a decade when the public made a massive contribution to ensure the banks survived, the amount these institutions have paid in corporation tax are of special interest. In this article, Geoff and J. Gay Meeks find a significant decline in receipts following the bailout, which presents some questions as well as answers

The Merger Mystery

Statistical studies over the last forty-five years show that, although there are success stories, very many mergers and acquisitions do not result in the increased operating profits that economics textbooks would lead one to expect. As consultancy McKinsey have put it, ‘Anyone who has researched merger success rates knows that roughly 70% fail’. Yet—mysteriously—M&A activity has boomed across the globe, with a forty-fold increase in deals done each year now compared with four decades ago, in spite of the adverse general evidence. How can it be that talented, energetic, highly skilled, law-abiding, income-maximising participants in the M&A market will often promote mergers that lead to no operating gains, frequently with adverse effects on the wider economy too? Drawing on findings from a wealth of statistical analyses and case evidence from many businesses, the book presents answers to this merger mystery. In a synthesis of ideas from several disciplines, solutions are detected in misaligned incentives, distorted financial engineering and information asymmetry. By revealing how weaknesses at multiple points can interact and cumulate to produce inefficient outcomes, the discussion serves as a corrective to the overwhelmingly positive tone of most commentary on M&A, whilst also advocating changes in participants’ contracts, in taxation, and in regulation which could significantly reduce the number of mergers that fail. Designed to be accessible to a wide readership, the book will be of interest to investors, to M&A practitioners and commentators, to researchers and students of economics, political economy, finance, management and accounting, and—importantly—to policy makers working in these areas

Interest rates rise to highest level since 2009 – are there any silver linings?

Geoff Meeks and J. Gay Meeks discuss the potential effects of rising interest rates on income distribution and mergers and acquisitions

Bidder Earnings Forecasts in Mergers and Acquisitions

We provide evidence on the benefits and costs of pro-forma earnings forecasts by bidding firms during acquisitions. We find that these forecasts are associated with a higher likelihood of deal completion, expedited deal closing, and with a lower acquisition premium − but only in stock-financed acquisitions. Our results are most consistent with forecast disclosure positively affecting the value perceptions of target shareholders persuading them to agree to acquisitions with stock. Our findings reveal that the effects of these public disclosures are stronger when private communication with target shareholders is more constrained. However, benefits of forecast disclosure only accrue to bidders that have built a credible forecasting reputation prior to the acquisition. Explaining why not all bidders forecast, we provide evidence on high forecasting costs, namely higher likelihood of post-merger litigation and CEO turnover, particularly for bidders with a weak forecasting reputation and for those that underperform post-merger

The Merger Mystery

Statistical studies over the last forty-five years show that, although there are success stories, very many mergers and acquisitions do not result in the increased operating profits that economics textbooks would lead one to expect. As consultancy McKinsey have put it, ‘Anyone who has researched merger success rates knows that roughly 70% fail’. Yet—mysteriously—M&A activity has boomed across the globe, with a forty-fold increase in deals done each year now compared with four decades ago, in spite of the adverse general evidence. How can it be that talented, energetic, highly skilled, law-abiding, income-maximising participants in the M&A market will often promote mergers that lead to no operating gains, frequently with adverse effects on the wider economy too? Drawing on findings from a wealth of statistical analyses and case evidence from many businesses, the book presents answers to this merger mystery. In a synthesis of ideas from several disciplines, solutions are detected in misaligned incentives, distorted financial engineering and information asymmetry. By revealing how weaknesses at multiple points can interact and cumulate to produce inefficient outcomes, the discussion serves as a corrective to the overwhelmingly positive tone of most commentary on M&A, whilst also advocating changes in participants’ contracts, in taxation, and in regulation which could significantly reduce the number of mergers that fail. Designed to be accessible to a wide readership, the book will be of interest to investors, to M&A practitioners and commentators, to researchers and students of economics, political economy, finance, management and accounting, and—importantly—to policy makers working in these areas

The financial performance of acquired companies in the Chinese stock market 1

This chapter deploys a range of metrics – accounting and stock market – to assess the financial performance of M&A for a market that is rapidly growing but has been relatively little-researched: the Chinese Mainland stock market. Although whether takeovers are efficiency- and value-enhancing is still an open question in the literature, and there are relatively few studies on this subject in emerging economies; especially in China, takeovers have been used by the Chinese government since the mid-1990s as an important policy instrument: to build a market competition mechanism for State-Owned Enterprises (SOEs); to restructure SOEs to save problematic large SOEs from failure; to rejuvenate or privatise small SOEs; and to adjust and optimise industrial structure and enhance development efficiency. The chapter helps assess the effectiveness of such reform strategies in the transition from an emerging economy to a mature market economy. The chapter is unusual relative to much of the global literature in the range of metrics it uses, drawing on and comparing both financial accounts and stock market returns, as well as in analysing the performance of targets after acquisition. Such target data are not usually available. The main analysis examines all 80 acquired publicly listed companies (PLCs) more than 50% of whose ownership changed hands in 2000–2005, an important phase in the Chinese transition. It also includes a limited follow-up analysis of a sample of 15 merger deals in 2006–2015 in the Chinese stock market, with performance data up to 2018. One important finding is that even though on average the stock market prices of both targets and acquirers react positively to takeover announcements in the short-term, takeovers do not seem to be followed by improvements in operating efficiency (in terms of pre-tax profitability) or in the stock market performance of the acquired PLCs in comparison with matched firms in the years after takeover. The results suggest that long-run performance was disappointing in the early phase of the growing Chinese M&A market, and there is tentative evidence that more recent experience has also not been positive