THE U.S. and European M&A cycles: A Markov switching and state space approach

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Mergers and Acquisitions’ cycles have been, over the past decades, an extremely interesting field of research, raising numerous questions concerning its length, triggers or even its relationship with the economic cycle. In this Work Project I intent to contribute with new evidence, mainly for European merger waves, but also to support previous studies in what regards to merger waves. I have chosen nonlinear models, such as the Markov Switching and the State Space models, to characterize the merger data, due to the advantage of identifying structural changes. I have concluded that there is evidence of merger waves, both in the U.S. and in Europe, and the possible surge of a new merger wave in Europe.