The role of capital capacity, spatial competition, and strategic orientation to mergers and acquisitions by U.S. farmer cooperative

U.S. farmer cooperatives are increasing in size but decreasing in number because of merger and acquisition (M&A) activity. However, the empirical literature on cooperative M&A activity is scarce and has only considered capital structure characteristics as possible explanations. We contribute to the existing literature by exploring the relationship of capital capacity, spatial competition, and strategic orientation to M&A activity by the largest 1000 U.S. farmer cooperatives in the 2014-2016 period. Using probit and negative binomial regressions, we find equity constraints did not inform recent M&A activity in the U.S. farmer cooperative sector. Rather, we find M&A activity increased in size and decreased in leverage. In addition, we find farmer cooperatives with larger market shares are less likely to pursue M&A activity, but proximity to other farmer cooperatives in the same sector increases the probability of external growth behavior. Also, farmer cooperatives which pursue differentiation are less likely to grow externally, suggesting recent M&As have been motivated by tangible as opposed to intangible asset acquisitions.