This paper investigates the short-term market reaction of nine profitefficiency, pre-classified merger deals of US banks over the time period from 1992 to 2003. The findings show that mergers combining low efficiency acquirers and targets create significant market returns following the merger event, whilemergers combining the least efficient acquirers with moderately efficient targets diminish the acquirer's wealthmore than any other type ofmerger. Furthermore, findings show that acquirers generally lose about 2.5% of theirwealth upon themerger announcement while targets experience, on average, significant market returns of 15.5% following the merger announcement. The findings of the cross sectional analysis show that the CARs of acquirers are positively related to their technical efficiency and geographic diversification, while targets' CARs are negatively related to both target size and revenue efficiency.