Applying the Negative Selection Algorithm for Merger and Acquisition Target Identification Theory and Case Study

Abstract

In this paper, we propose a new methodology based on the Negative Selection Algorithm that belongs to the field of Computational Intelligence (specifically, Artificial Immune Systems -AIS) to identify takeover targets. Although considerable research based on customary statistical techniques and some contemporary Computational Intelligence techniques have been devoted to identify takeover targets, most of the existing studies are based upon multiple previous mergers and acquisitions. Contrary to previous research, the novelty of this proposal lies in the methodology's ability to suggest takeover targets for novice firms that are at the beginning of their merger and acquisition spree. We first discuss the theoretical perspective and then provide a case study with details for practical implementation, both capitalizing from unique generalization capabilities of AIS algorithms.