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Sectoral and institutional characteristics of acquirers and targets: a dyadic approach to deal completion

Rimi Zakaria (Department of Management, University of Wisconsin-Whitewater, Whitewater, Wisconsin, USA)
Eylem Ersal Kiziler (Department of Economics, University of Wisconsin-Whitewater, Whitewater, Wisconsin, USA)

Review of International Business and Strategy

ISSN: 2059-6014

Article publication date: 7 March 2023

Issue publication date: 24 May 2023

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Abstract

Purpose

This study takes a dyadic approach to explaining merger and acquisition (M&A) deal outcomes. Acknowledging the socio-cognitive (e.g. intangible and macro-environmental) idiosyncrasies, the authors theorize that some acquirer–target dyads have a superior ability to complete complex relational transactions in an M&A deal. Specifically, deals are successful when an acquirer and a target: are similar considering their sectoral characteristics, have contextually-informed deal-making competencies, and are familiar with one another given their sectoral and institutional features.

Design/methodology/approach

This study uses logistic regression analysis to examine how sectoral and institutional characteristics in the acquiring and target company dyads relate to the likelihood of merger and acquisition deal completion.

Findings

Analyzing a sample of 37,560 M&A deals, the authors find empirical evidence in support of the dyadic to deal completion. The authors find that sectoral similarity and institutional familiarity in an M&A dyad can predict the likelihood of deal completion. Specifically, service multinational acquirers are more competent than their manufacturing counterparts in general, and in same-sector and same-country deals in particular. In contrast, service sector acquirers also are at a relative disadvantage vis-à-vis their manufacturing counterparts in cross-national deals.

Research limitations/implications

Considering the theoretical and managerial implications, the authors identify new avenues for future research on service and manufacturing M&A dyads that can deepen the knowledge of inter-firm transaction processes.

Originality/value

First, the authors draw on the socio-cognitive, behavioral, and relational models to explain M&A deal process in both domestic and cross-border settings. Drawing on service vis-à-vis manufacturing sector business models, the authors predict deal completion. Second, the authors propose that familiarity between the acquiring and target companies in the form of sectoral and cross-national factors becomes pivotal to the inter-firm processes. Finally, the authors empirically demonstrate how inter-firm dynamics in a dyad can pose complex deal-making challenges, which make some acquirers especially susceptible to contextual shocks.

Keywords

Acknowledgements

This research was supported through the summer research award by the College of Business and Economics, University of Wisconsin-Whitewater.

Citation

Zakaria, R. and Ersal Kiziler, E. (2023), "Sectoral and institutional characteristics of acquirers and targets: a dyadic approach to deal completion", Review of International Business and Strategy, Vol. 33 No. 4, pp. 649-668. https://doi.org/10.1108/RIBS-08-2022-0074

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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