We examine leverage changes around mergers by similar-size firms. If asset characteristics drive leverage, both acquirer and target premerger leverage should predict long-term postmerger leverage. We find that only acquirer premerger leverage has a long-term effect. The effect of target premerger leverage, while highly significant right after the merger, disappears after two years. These findings cannot be explained by suboptimal premerger leverage of targets, sales of target assets, or corporate governance characteristics. As acquirer managers usually manage the merged firm, our findings support the hypothesis that managerial preferences have a strong effect on firm leverage.