Search results

1 – 10 of over 1000
Book part
Publication date: 22 November 2016

Alen Sacek

Cross-border acquisitions play an important role in corporate strategic development and international expansion. During the past decades, mergers and acquisitions have been…

Abstract

Cross-border acquisitions play an important role in corporate strategic development and international expansion. During the past decades, mergers and acquisitions have been intensively researched through the lenses of strategic management, corporate finance, behavioral finance, etc. Despite the intense effort, the progress made is still fragmented and lacks unifying theories that approach the entire acquisition process on the one hand, and in-depth research of critical factors on the other. The intent of the research paper is to establish a vital link between academic research and practice of mergers and acquisitions, especially regarding the pre-acquisition evaluation.

In detail, the research paper investigates critical factors – and their inclusion in the pre-acquisition due diligence, before decision about acquisition is made. Pre-acquisition due diligence theoretically conforms to organizational learning theory, which proposes the more the acquiring firm learns about the acquisition target, the higher the probability of a successful acquisition. The central hypothesis states that due diligence, including the critical factors, in the pre-acquisition phase is related to acquisition success.

Using a multidimensional measure of critical factors, the empirical evidence is based on 85 cross-border acquisitions that took place between 2007 and 2013 in the European automotive industry. The quantitative analysis finds positive association between the Choice of Strategic Partner, Business Capabilities and HR Knowledge, and Financial Factors and Acquisition Premium as critical factors of due diligence and acquisition success. The strongest relationship is between business capabilities and knowledge transfer as the main asset for realization of synergy values and successful acquisition. In this context, the valuation of the business capabilities of the acquisition targets is classified as the main challenge for reflecting suitability of the acquisition price and establishing value generation from the combined firms in the post-acquisition phase.

By studying acquisition risk and critical factors – both success and failure reasons – this research tested and proved theoretically sound framework for successful acquisition. From a practical standpoint, the research results provide acquisition management with a proven model for pre-evaluating acquisition candidates by means of comprehensive due diligence.

Details

Contemporary Issues in Finance: Current Challenges from Across Europe
Type: Book
ISBN: 978-1-78635-907-0

Keywords

Open Access
Article
Publication date: 17 September 2020

Ephraim Kwashie Thompson and Changki Kim

This paper aims to show that information asymmetry plays a vital role in the post-M&A performance-time until deal completion nexus. The findings are that the due diligence

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Abstract

This paper aims to show that information asymmetry plays a vital role in the post-M&A performance-time until deal completion nexus. The findings are that the due diligence hypothesis and the overdue hypothesis proposed and tested in Thompson and Kim (2020) are influenced by the information asymmetry of the target during the negotiation process. Thus, mergers that involve more opaque targets that take a shorter time to close perform better, whereas those that take too long to close experience poor post-M&A performance. Conversely, there is no such effect when the mergers involve targets that are transparent and not plagued with large information asymmetry problems. These results hold for the short-term supporting the evidence that information asymmetry problems are severe before the merger is consummated and become attenuated post-merger.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 28 no. 3
Type: Research Article
ISSN: 1229-988X

Keywords

Article
Publication date: 1 January 2006

Ted Foos, Gary Schum and Sandra Rothenberg

The purpose of this paper is to look at some of the factors that influence the transfer of tacit knowledge between two product development partners.

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Abstract

Purpose

The purpose of this paper is to look at some of the factors that influence the transfer of tacit knowledge between two product development partners.

Design/methodology/approach

Research involved the collection of both qualitative and quantitative data. The qualitative data was based on 13 interviews with various individuals, representing three companies, charged with integrating external technology. The quantitative portion of the data was collected through an online survey. The survey was executed by soliciting responses from managers of 39 discreet projects involving various types of external technology integration, representing five different companies.

Findings

The paper provides evidence that trust, early involvement, and due diligence influence the extent of meeting technology transfer expectations and tacit knowledge transfer expectations. It also finds that the subject of tacit knowledge transfer, content and process, is poorly understood. While managers and project leaders saw the value of tacit knowledge, there were different perceptions of the goals successful knowledge transfer and a lack of processes to manage its process. While project managers may feel that they have tacit knowledge transfer in hand, they have not managed to transfer the knowledge needed for long‐term product management.

Research limitations/implications

There are a number of limitations affecting the scope of these findings. For one, our survey respondents were all project or product managers. Future research should include a broader base of participants, both horizontally and vertically. Second, interviews and surveys were confined to a total of five US companies in three industries. Future research would benefit from a larger sample size, as well as greater sample diversity in terms of firm size, industry, and cultural context. Lastly, the measure of tacit knowledge transfer needs additional validation.

Practical implications

The paper offers several recommendations to help managers begin to think of tacit knowledge as an independent entity and manage it accordingly.

Originality/value

This paper offers empirical support for some of the factors that influence the extent of meeting technology and tacit knowledge transfer expectations. Moreover, it offers a unique model that highlights how different levels of an organizational hierarchy are governed by significantly different goals and expectations with regard to tacit knowledge transfer.

Details

Journal of Knowledge Management, vol. 10 no. 1
Type: Research Article
ISSN: 1367-3270

Keywords

Article
Publication date: 2 May 2008

Nan J. Morrison, Guy Kinley and Kristin L. Ficery

The purpose of this of this paper is to show that judging by the number of mergers that still go sour, there is plenty of room to intensify the kind of operational due diligence

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Abstract

Purpose

The purpose of this of this paper is to show that judging by the number of mergers that still go sour, there is plenty of room to intensify the kind of operational due diligence that can uncover deal‐breaking factors before they destroy shareholder value. The paper focuses on specifically supply chain and IT as the two operations areas that deserve special attention because they still get short shrift.

Design/methodology/approach

The paper was written based on survey findings, publicly sourced information, case study work and Accenture's point of view based on work at over 400 M&A client engagements, three quarters with companies in the Global 1000. The two surveys cited are: 2006 Accenture study of supply chain managers; and Third Annual Due Diligence Symposium 2007 Survey.

Findings

The paper finds that when senior, experienced operations experts are involved in due diligence and pre‐merger planning, the major risks and potential deal breakers are exposed quickly – before deal momentum pushes things to the point where participants are reluctant to walk away. Also, with this input, deal makers can accurately assess the true investments needed as well as the “to be” operating costs of the joined companies. Those numbers can be used to adjust post‐merger cash flow projections, which are often extrapolated based on percentage estimates and projected top‐down rather than bottom‐up based on major projects under way or on operating model complexity. The operations experts allow new potential sources of value to be identified and considered as part of the valuation of the target company. The purchase price may then be adjusted up or down.

Originality/value

Dealmakers have significantly improved their understanding of, and skills in conducting, many elements of mergers and acquisitions, especially valuation and merger integration. Yet in example after example, due diligence processes have proven to be an Achilles heel. Dealmakers today must use every tool at their disposal to improve their odds of a successful deal while at the same time avoiding bad acquisitions. That means placing the same importance on operational due diligence as on valuation, traditional due diligence and merger integration. It also calls for using operational due diligence to pinpoint initiatives that protect and create value after an acquisition. The shift to this next level of due diligence will require enhancing rather than replacing traditional due diligence activities. The due diligence lists will be longer, yes, but importantly, they will be forward‐looking, gauging current observations against future operating needs.

Details

Journal of Business Strategy, vol. 29 no. 3
Type: Research Article
ISSN: 0275-6668

Keywords

Open Access
Article
Publication date: 27 July 2021

Masatoshi Fujii, Chie Hosomi and Yoshiaki Nose

This study aims to fill the gap in previous research that focuses on the superficial aspects of equity crowdfunding (ECF) campaigns and financial practices by examining financial…

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Abstract

Purpose

This study aims to fill the gap in previous research that focuses on the superficial aspects of equity crowdfunding (ECF) campaigns and financial practices by examining financial literacy aspects, such as due diligence and valuation, in terms of factors that influence Japanese individual investors' investments in ECF.

Design/methodology/approach

The status of information disclosure in ECF campaigns is checked. In addition, the feasibility of the initial due diligence and valuation using this information is verified. Specifically, the lack of financial literacy hypothesis is developed and (1) expected market capitalization in the final fiscal year of the business plan and (2) expected returns on investment (IRR: internal rate of return) are estimated.

Findings

ECF campaigns in Japan disclose information equivalent to that obtained by professional venture capitalists. Analysis of the disclosed business plan allows for initial due diligence and valuation. By contrast, due diligence reveals that some projects are unlikely to be listed even if their business plans are met, and others have low IRRs. In addition, a stock acquisition rights project, in which even professional investors are unable to calculate IRRs, is completed at the same rate as a common stock project; this suggests that individual investors lack financial literacy.

Originality/value

Analyzing ECF from financial literacy aspects, such as due diligence and valuation, is unique. Such aspects are essential for private equity investments but have not been addressed in previous studies.

Details

Journal of Capital Markets Studies, vol. 5 no. 1
Type: Research Article
ISSN: 2514-4774

Keywords

Article
Publication date: 2 October 2007

Darek Klonowski

The purpose of this paper is to focus on the investigation of the venture capital investment process in the emerging markets of Central and Eastern Europe (CEE), including…

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Abstract

Purpose

The purpose of this paper is to focus on the investigation of the venture capital investment process in the emerging markets of Central and Eastern Europe (CEE), including Hungary, Poland, the Czech Republic, Slovakia, Romania, and Russia. The study aims to describe the mechanics by which venture capital firms operating in the CEE region process deals.

Design/methodology/approach

The paper is based on a two‐phase interview interaction process with venture capitalists operating in the CEE region. In the first semi‐structured (exploratory) phase of the study, 14 venture capitalists agreed to participate in one‐hour interview and aimed at discussing their venture capital process. In the second phase of the study (confirmatory), 24 venture capital firms commented on the actual fit of the proposed nine‐stage model into their past investments.

Findings

The study has two conclusions. Firstly, the study confirms the existence of a nine‐stage venture capital investment model, comprised of deal origination, initial screening, feedback from the investment committee and due diligence Phase I, feedback from the investment committee (due diligence Phase I), pre‐approval completions, formal approvals and due diligence Phase II, deal completion, monitoring, and exit. Secondly, the proposed model defines the venture capital process in terms of three channels of activity: document channel, information channel, and decision channel.

Originality/value

The study is important for at least four reasons. Firstly, the study focuses on the investigation of the entire venture capital process. Previous research in the area focuses on some specific facets of the venture capital process. Secondly, the paper investigates the connection between decision‐making, information gathering and written communication within a venture capital fund. Thirdly, the study focuses on the most recent period of development of the CEE industry. Many venture capital firms only recently crystallized their venture capital process. Lastly, the study proposes areas of further research for academics and makes suggestions for practitioners.

Details

International Journal of Emerging Markets, vol. 2 no. 4
Type: Research Article
ISSN: 1746-8809

Keywords

Book part
Publication date: 22 November 2012

Thomas Straub, Stefano Borzillo and Gilbert Probst

This chapter develops a decision-making framework to analyze important dimensions of mergers and acquisitions. Using a PLS approach, we show that strategic deals’ performance …

Abstract

This chapter develops a decision-making framework to analyze important dimensions of mergers and acquisitions. Using a PLS approach, we show that strategic deals’ performance – measured by means of synergy realization, relative performance (compared to the competition), and absolute performance – is determined by three dimensions: strategic logic, organizational behavior, as well as finance. We find that the following significant variables, which stem from each of these dimensions, should be taken into account to ensure a successful deal: market similarities, market complementarities, operational similarities, operational complementarities, market power, purchasing power, acquisition experience, relative size, and due diligence.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-1-78190-460-2

Keywords

Article
Publication date: 9 April 2021

Sara Quach, Scott K. Weaven, Park Thaichon, Debra Grace, Lorelle Frazer and James R. Brown

Framed within the theoretical domain of attribution theory, this study aims to investigate the antecedents of experienced regret following an entrepreneur’s business failure…

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Abstract

Purpose

Framed within the theoretical domain of attribution theory, this study aims to investigate the antecedents of experienced regret following an entrepreneur’s business failure (defined as firm discontinuance, closure or bankruptcy) and the impact of regret on personal well-being.

Design/methodology/approach

The population of interest was business owners whose businesses had failed within the past five years. The data was collected from 319 failed entrepreneurs using an online survey. Structural equation modelling was used to test the hypotheses presented in this study.

Findings

External attribution, including economic uncertainty and contract restrictions, was positively related to feelings of regret. Considering internal attribution, due diligence had a positive effect on regret whereas customer relationship development ability can reduce feelings of regret. Moreover, prevention-focused entrepreneurs were likely to experience higher levels of regret when engaging in extensive consideration in using information. Finally, regret had a detrimental effect on the entrepreneurs’ well-being.

Research limitations/implications

The research provides fresh perspectives on experienced regret, a relatively unexplored emotion in the entrepreneurship literature. In the context of small business operations, the locus of attribution (associated with business failure) is the key influence on learning following failed business attempts.

Practical implications

This study extends current knowledge of regret in the context of entrepreneurial failure, which has a significant catalytic effect on employment and entrepreneurial mobility.

Originality/value

This research sheds light on how emotional responses are derived from an entrepreneur’s self-assessment of their performance and attribution of blame for failure.

Details

European Journal of Marketing, vol. 55 no. 8
Type: Research Article
ISSN: 0309-0566

Keywords

Book part
Publication date: 19 September 2014

Cheng-Wei Wu and Jeffrey J. Reuer

In M&A markets, acquirers face a hold-up problem of losing the value of investments they make in due diligence, negotiations, and post-acquisition planning if targets would pursue…

Abstract

In M&A markets, acquirers face a hold-up problem of losing the value of investments they make in due diligence, negotiations, and post-acquisition planning if targets would pursue the options of waiting for better offers or selling to an alternative bidder. This chapter extends information economics to the literature on M&A contracting by arguing that such contracting problems are more likely to occur for targets with better outside options created by the information available on their resources and prospects. We also argue that acquirers address these contracting problems by using termination payment provisions to safeguard their investments. While previous research in corporate strategy and finance has suggested that certain factors can facilitate an acquisition by reducing a focal acquirer’s risk of adverse selection (e.g., signals, certifications), we note that these same factors can make the target attractive to other potential bidders and can exacerbate the risk of hold-up, thereby leading acquirers to use termination payment provisions as contractual safeguards.

Article
Publication date: 3 September 2018

Ziva Rozen-Bakher

Due to the high failure rate of the M&A strategy, this paper aims to raise the question of whether the pre-M&A performances could predict integration success in cross-border M&As…

Abstract

Purpose

Due to the high failure rate of the M&A strategy, this paper aims to raise the question of whether the pre-M&A performances could predict integration success in cross-border M&As with the aim of reducing the integration risk. Cross-border M&A is considered an important strategy for gaining access to foreign markets, but at the same time, cross-border M&As involve a high risk for failure, particularly due to the problematic integration stage in cross-border M&As.

Design/methodology/approach

The study presents a research model that includes six pre-M&A performances – the revenue and profitability of the acquirer and the target, the revenue ratio and profitability ratio – with the aim of analysing if the pre-M&A performances could predict integration success. The sample of the study includes 68 public firms that were engaged in cross-border M&As from 13 countries. The database of the study is based on 272 annual reports (10-K) of the public companies that are included in the sample.

Findings

The results show that the revenue and profitability of the acquirer and the target predict integration success. However, the revenue ratio predicts integration success, but not the profitability ratio. The results also show that a larger target leads to a complicated integration process that ends in a failure of the integration stage, while a larger acquirer could help to facilitate the integration stage. The study also indicates that buying a small target in relation to the acquirer decreases the risks of the integration stage. Moreover, the pre-performances of the acquirer more predict integration success compared to the pre-performances of the target.

Originality/value

The study suggests that buying an inefficient target creates opportunities for removing redundancies, while buying profitable target may hinder the possibilities for eliminating duplicate jobs and operations. This mixed effect highlights the challenges in implementing of M&A strategy in cross-border-M&As.

Details

International Journal of Organizational Analysis, vol. 26 no. 4
Type: Research Article
ISSN: 1934-8835

Keywords

1 – 10 of over 1000