Alternative Investing

The Impact of Industry Shocks on Takeover and Restructuring Activity

Topics - Alternative Investing

${ numberSection } ${ text }
The Impact of Industry Shocks on Takeover and Restructuring Activity

The large number of corporate takeovers during the 1980s has been characterized as the fourth takeover wave in the U.S. during the past 100 years. This paper assesses the proposition that industry shocks contribute to the extensive takeover and restructuring activity of that decade. Examples of shocks include deregulation, changes in input costs, and innovations in financing that induce or enable alterations in industry structure.

The hypothesis we maintain in our analysis is that corporate takeovers such as tender offers, mergers and leveraged buyouts are often the least-cost means for industry structure to respond to the changes brought about by economic shocks. Our central prediction is that the takeover and restructuring activity in the 1980s clusters in the industries that experience shocks of the greatest magnitude.

We find that the takeover and restructuring activity in a particular industry tends to cluster within a narrow range during the sample period, suggesting that common factors influence the takeovers occurring in an industry. We also document a significant interindustry variation in the rate of takeover and restructuring activity that is directly related to the magnitude of economic shocks borne by industries in the late 1970s and early 1980s. The link is maintained for all surviving firms in an industry, affirming that the relation between industry shocks and takeover activity stems from industry-wide phenomena, rather than being due solely to target firms.

Overall, the empirical results suggest that the takeover wave of the 1980s entails an adaptation of industry structure to a changing economy.

Published in

Journal of Financial Economics

AQR Capital Management, LLC, (“AQR”) provide links to third-party websites only as a convenience, and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by us of any content or information contained within or accessible from the linked sites. If you choose to visit the linked sites, you do so at your own risk, and you will be subject to such sites' terms of use and privacy policies, over which has no control. In no event will AQR be responsible for any information or content within the linked sites or your use of the linked sites.

The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates or its employees. This information is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein. Past performance is not a guarantee of future results.


Hypothetical performance results have many inherent limitations, some of which, but not all, are described herein. The hypothetical performance shown was derived from the retroactive application of a model developed with the benefit of hindsight.  Hypothetical performance results are presented for illustrative purposes only.


Diversification does not eliminate the risk of experiencing investment loss.


Certain publications may have been written prior to the author being an employee of AQR.

This material is intended for informational purposes only and should not be construed as legal or tax advice, nor is it intended to replace the advice of a qualified attorney or tax advisor.


AQR Capital Management is a global investment management firm, which may or may not apply similar investment techniques or methods of analysis as described herein. The views expressed here are those of the authors and not necessarily those of AQR.