What factors drive takeovers in Australia?

We examine the relationships between the wealth changes associated with a takeover announcement to distinguish between three major competing motives—synergy, hubris, and agency. Empirical tests indicate that the synergy motive is the predominant explanation for the majority of takeovers in Australia; however, the evidence is consistent with the simultaneous presence of hubris in value-creating takeovers. The evidence also suggests agency, not hubris, is the primary motivation for the takeovers which result in value destruction.