Search results

We study the wealth effects of 177 domestic and cross‐border acquisitions announced by Spanish corporations between 1990 and 2004. Our findings show that domestic transactions significantly outperform international transactions. However, controlling for several firm and transaction characteristics, we do not find any cross‐border effect for acquisitions of Spanish firms. Short‐term valuation is driven by three factors in particular. Target size and bidder’s profitability negatively affect announcement returns, whereas transactions in related industries have a positive effect. Our results may indicate that in contrast to prior empirical findings, international diversification incurs higher costs than synergies and is, among others, driven by managerial and ownership factors.

This paper seeks to compare target shareholders' wealth gains in domestic and cross‐border acquisitions in India. Two existing schools of thought namely, the industrial organizational theory and bid‐specific factors theory have been compared to identify which of these two theories affect the target shareholders' announcement wealth gains in India.

Standard event study methodology has been applied to compute the announcement returns for domestic and cross‐border acquisitions. Cross‐border effect is calculated to compare the value creation in the two sets of acquisitions. Furthermore, cross‐sectional regression analysis is conducted to capture the impact of bid‐related features on target shareholder's value creation.

The results indicate that both domestic and cross‐border acquisitions have created value for the target company shareholders on the announcement. Nonetheless, the analysis of cross‐border effect as well as regression analysis makes it evident that value creation is higher for domestic acquisitions as compared to cross‐border acquisitions due to the influence of various bid‐specific factors. Thus, in India, bid‐related variables are the fundamental drivers of the target's announcement wealth gains irrespective of the nationality of the acquirer.

The paper extends the discussion on the target's wealth creation in domestic and cross‐border acquisitions by segregating the existing literature into two schools of thoughts namely, the industrial organizational school and bid‐specific factors school in an emerging economy like India. Moreover, various reasons specific to Indian mergers and acquisitions have been forwarded to explain the subdued market reaction to cross‐border acquisitions.

Prior research on post-acquisition integration has paid little attention to the factors that influence the development of trust between the members of an acquiring firm and those of the target firm. Using a policy capturing approach, we found that five aspects of the takeover situation and the integration process affect target firm members’ trust in the acquiring firm's management: takeover friendliness, national cultural similarity, interaction history of the acquiring firm and the target firm, retained autonomy, and attractiveness of the acquiring firm's HR policies. Our findings suggest that of the five trust antecedents, the attractiveness of the acquirer's HR policies is by far the most powerful predictor of target firm members’ trust in the acquiring firm's management. The implications for post-acquisition integration research and practice are discussed.

This paper aims to evaluate the robustness of the listing effect in Australia, that is whether acquisitions of private firms create more value to the bidding firm’s shareholders than acquisitions of publicly listed firms.

The authors analyze the market reaction to the announcement of takeover bids initiated by Australian public firms on private and public targets over the period 1990-2011. The analysis controls for a wide range of bidder, deal and target country characteristics that are likely to correlate with the target’s listing status and acquirer abnormal returns. The authors also use a selection model to address the endogenous choice of the target’s listing status.

The results indicate that bidders experience significantly higher abnormal returns of about 1.7 per cent in the 11-day event window when the target is a private firm. The authors show that this result is broad-based and persistent. It does not appear to depend on whether the target is small or large; whether it is related or unrelated to the bidder’s industry; whether it is in the resources sector; and whether the transaction is domestic or cross-border. They find some evidence that bidder returns might be stronger for larger acquisitions, for unrelated targets, and in poor market conditions such as in the wake of the recent global financial crisis.

The research would benefit from the inclusion of the bidding firm’s ownership and governance characteristics.

The results support the view that market frictions contribute to make private firms attractive targets.

The analysis confirms the pervasiveness of the listing effect in a market characterized by a lesser degree of competition, higher search costs and the significance of the natural resources sector.

This paper aims to address the question: What is the distribution of value (in pounds) created in a sample of domestic takeovers in the United Kingdom from 2013 to 2020 among acquirer and target stockholders?

The author employs a traditional event study methodology to calculate the percentage excess returns of companies on the announcement date. These returns are then converted into pound-denominated excess returns using the companies' market capitalizations. This allows the author to estimate the synergies of the mergers and acquisitions (M&As) and how they are allocated between acquirers and targets. This innovative transformation from percentage to pound excess returns establishes a new ratio methodology for addressing the paper's objective.

This paper reveals that in UK takeovers, 40 percent of the synergies in pounds are allocated to the stockholders of acquiring companies, while 60 percent go to the stockholders of target companies. In other words, acquirers retain a significant portion—more than half—of the synergies generated in these domestic deals. This original finding is statistically significant at the one percent level and strongly contradicts the hypothesis that acquirers, at best, merely break even.

The evidence that UK takeovers distribute value gains nearly equally between domestic deal parties challenges the enduring conventional insight in the M&A literature. This conventional wisdom suggests that the value created by business combinations is entirely distributed to target company stockholders. Consequently, this reexamination may have broader implications, offering an alternative perspective on the motives behind business combinations. This perspective differs from the “managerial hubris hypothesis,” which aligns with the prevailing conventional insight but receives limited support in the original finding reported here.

The proliferation of mergers during the 70s and 80s has generated voluminous amounts of research with a primary focus on the impact to the shareholders from both the acquired and the acquiring firms. Relatively little research has been placed on the valuation process itself, especially within the international merger setting. To fill the void, this article details a valuation process based on capital budgeting. This approach is designed for use by foreign firms contemplating mergers or acquisitions across international borders. The framework may also be used to help explain the increasing numbers of non‐US acquisitions of US firms and to make inferences about divestiture and leveraged buy‐out (LBO) activity.

This paper aims to analyze outbound investments from China at the time of economic crisis caused due to the coronavirus (COVID-19) pandemic and how target valuation and the host country’s inbound investment policies influence the acquisition intents. As firms witness low valuations during an economic downturn, they become attractive targets for opportunistic buyers, who may be driven by motives beyond business and influenced by the home country’s political agenda. Such attempts are countered with the adoption of restrictive investment policies in host countries.

The study uses secondary data on cross-border acquisitions from China over the past year and compares the characteristics of these acquisitions with cross-border acquisitions of acquirers from other large developed and developing economies.

Statistical analyzes show that there are significant differences in the way acquirers from China pursue strategic asset seeking, creeping and control seeking acquisitions during the pandemic and the pre-pandemic period. This paper also observes that reduced valuation of the target, due to economic downturn or otherwise, result in greater propensity in strategic asset seeking acquisitions by Chinese acquirers. At the same time, adverse policies at host nations negatively influence the strategic asset seeking propensity of these acquirers. In addition, the premium in the valuation of target assets during the pandemic does not drop significantly when compared with that of the pre-pandemic period.

With the outbreak of COVID-19 and its concomitant economic impact across the globe, the study brings forwards insights on predatory foreign direct investment (FDI) and explores how policy responses in host countries can be comprehensive rather than disembedded and unilateral.

Corporate history has featured a number of approaches to restructuring, both internal and external to the firm. External restructuring has taken place through a variety of mechanisms, including mergers, acquisitions, consolidations, divestitures, leveraged buyouts, and spinoffs. Restructuring has been especially prevalent on worldwide basis since the 1980s. In addition to developments in western industrialized economies, the presence of the phenomenon within the world business system has been augmented by the transition of so many previously planned economies to a new market‐based framework.

Mergers and acquisitions (M&As) are important strategic actions undertaken by firms to access resources and markets. However, firms face substantial challenges in M&As during deal completion. While prior literature reviews synthesize the studies on the post-merger consequences of M&As, the literature on deal completion is largely fragmented. In this paper, the authors synthesize prior literature on deal completion into the antecedents and consequences framework and map various studies across the international business and management, finance and accounting literature at the macro-, meso- and micro-levels.

The authors adopt a content analysis-based methodology to conduct the review. First, the authors identify existing literature on deal completion based on keyword searches. Next, the authors propose a framework that integrates the extant literature from a multi-theoretic perspective across four broad themes: concepts, antecedents, implications and moderators. In this study, the authors consider not only empirical but also conceptual papers to strengthen the theoretical foundations of M&A literature. Finally, after synthesizing various studies, the authors highlight a future research agenda on deal completion.

Based on the review, this study provides important avenues for future research on M&A deal completion.

This study theoretically integrates multi-disciplinary and multi-country research on acquisition completion.

The purpose of this paper is to draw attention to the significant lower completion rate of mergers and acquisitions (M&As) by firms from emerging economies (EEs) (China in particular) compared with firms from advanced economies, and identify the country- and industry-level factors that affect the completion of cross-border M&As by Chinese firms.

This study explores the effects of economic, cultural and institutional distances and target firms in technology- and knowledge-intensive industries on the completion of cross-border M&As by Chinese firms. It also examines the interplay between distance factors and technology- and knowledge-intensive industries on cross-border M&A completion. This study adopts a quantitative approach and is based on a sample of 768 announced cross-border M&A deals by firms in China between 2000 and 2015.

The results indicate that economic distance increases the likelihood of the completion of cross-border M&As when the target is in a more developed economy than China, but decreases when the target is in a less developed economy. Cultural and institutional distances have a significant, negative impact on the completion of cross-border M&As. In addition, target technology-intensive industries have a significant direct negative effect on cross-border M&A completion and moderate the relationship between the distance factors and the likelihood of cross-border M&A completion.

The results reveal factors that affect the completion of cross-border M&As by emerging market firms (EMFs). Further research, however, is needed to discover how distance factors affect how EMFs find, evaluate and negotiate international bids. To broaden the scope of the research, data for firms from other EEs would also be required.

The study expands the literature that considers the effects of major distances on cross-border M&A completion. In addition, the importance of defining and measuring distances in the context of cross-border M&As is highlighted. Finally, the study expands knowledge on how cross-border M&As affect the internationalization strategies of EMFs by conceptualizing and testing how target industries affect cross-border M&A completion.