Review of Industrial Organization
12: 579–591, 1997.
1997 Kluwer Academic Publishers. Printed in the Netherlands.
The Characteristics of Takeover Target Firms: The
Case of the English Brewing Industry, 1945–1960
Strategy and International Business Group, City University Business School, Barbican Centre,
London EC2Y 8HB, U.K.
Abstract. The paper examines if takeovers target the “correct” ﬁrms. Using the English brewing
industry (1945–1960) as a case study, size and conventional performance criteria of taken-over,
independent and merging ﬁrms are assessed, and shown not to be valid target indicators. Comparison
of a real estate/property utilization parameter – average asset value per “tied house” – for each ﬁrm
category, shows that taken-over ﬁrms have the lowest average asset value per tied house. Low average
asset value per house characterizes ﬁrms which, by failing to optimize their property assets, are poor
performers. Takeover therefore, in this case, targets the “correct” ﬁrms.
Key words: English brewing industry, property, takeover targeting.
There are many reasons for takeover and much of the analysis of takeovers concen-
trates on those reasons. An important question however is – “Do takeovers target
the “correct” ﬁrms, particularly in times of change?” 1945–1960 was a period of
considerable change in post-war Britain which saw reconstruction and reposition-
ing of many industries. The economic environment was much changed from that
of the pre-war era and in particular the value of property and land was escalating
rapidly. The present paper considers if takeover targeting was performance relat-
ed or whether other factors, speciﬁcally industry’s relationship to the burgeoning
property market was of equal or greater signiﬁcance and if the correct ﬁrms were
A takeover or acquisition occurs when one company secures effective control of
another by its purchase from the shareholders. A merger occurs when two or more
companiesagreeto join forces to form a newcompany,with control shared between
the former separate companies. Determination of whether an amalgamation is a
takeover, or a merger, is not always straightforward. The presentation and form is
often dictated by ﬁnancial and administrative considerations and can depend on
the social acceptability of one form over the other (Singh, 1971, p. 1; Krekel et al.,
I thank William G. Shepherd for his comments and suggestions on this paper and its earlier
drafts. I gratefully acknowledge the helpful comments of Carol Heim, Michael Best and Robert
Hopley on earlier drafts, of my colleagues at City University Business School, and of the anonymous