Acquisition Risk Management: An Analysis of Changes in Credit Risk Following Company Acquisitions

Abstract

This paper examines the relationship between acquisitions and changes in the acquirer’s credit risk. Although many companies seek to acquire other companies in order to mitigate risk through diversification, research on the topic shows that, on average, the credit risk of acquirers increases following acquisitions. Through regression analysis justified by economic and financial theory, this paper identifies key factors that lead to higher post-acquisition credit risk so that companies can make more informed decisions around acquisitions.