When do firms go in for growth by acquisitions?

This paper analyses the incidence of acquisitions, and the determinants of expenditure or acquisitions, in a sample of 110 UK quoted companies, 1970-89. Financial variables, especially those related to Jensen's 'free cash flow' theory of acquisitions are found to be significant, notably for dominant firms. But there is little support for the inclusion of market structure variables which seek to capture the strategic role of acquisitions as an instrument of competition in oligopolistic markets.