This paper shows that indirect evidence is often available to assist in understanding the timing of a vertical merger or divestiture. In particular, it is shown that in cases involving Firm-Specific Capital (FSC), changes in the residual correlation (after removing market and industry effects) between the firms' stock returns are helpful in explaining the reason for and the timing of the merger/divestiture. The ramifications of this finding are immediate, since anything that can pinpoint the reason for a merger, and, moreover, the reason for the timing of a merger, will make merger policy more efficient and productive.