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Open Access
Article
Publication date: 6 April 2021

Veronika Vinogradova

The paper investigates the market performance of strategic acquisitions for growth in the fifth and sixth merger waves and outlines the major determinants that affect the…

2689

Abstract

Purpose

The paper investigates the market performance of strategic acquisitions for growth in the fifth and sixth merger waves and outlines the major determinants that affect the performance of acquiring companies in these most complex and most challenging corporate transactions.

Design/methodology/approach

To perform the quantitative analysis a unique data sample was built out of acquisitions performed in the 5th and 6th merger waves with an only single purpose – strategic growth. Their performance was first analyzed using the method of market-based event study. In addition, the impact of several non-accounting determinants identified through a thorough literature review was tested using univariate/multivariate regression analysis.

Findings

The new findings of the study state that strategic acquisitions for growth created more value for acquiring companies if they were completed internationally and involved an acquisition of a middle-sized company. Moreover, the acquisition of targets in the less related industries (2-SIC) led to stronger performance of acquirers, especially in the international settings.

Research limitations/implications

The study suggests additional directions for future research. The future analysis can investigate the post-merger acquisition performance of strategic acquirers and can focus on additional financial (accounting) determinants in the evaluation of performance. This perspective can not only address the limitations imposed by the assumption of efficient capital markets but also provide additional insights.

Practical implications

The results of current study have important implications for executives performing M&A for growth. They show that the market reaction to M&A announcement can be at least partially anticipated and help managers to plan their strategic moves based on a defined set of variables.

Social implications

The study contributes to the sustainable, value-creating growth dynamics and encourages Executives to “lead for value.”

Originality/value

(1) In contrast to the existing studies that do not differentiate between the transaction rationale in their analysis, this paper focuses explicitly only on those acquisitions that have strategic growth as their primary objective and responses therefore, to the problem stated by Halpern (1983). This approach helps to mitigate the distortion of results and make a reliable assessment of the strategic move. (2) The results of quantitative analysis also outline that acquisition of mid-sized targets and larger degree of diversification (2-SIC, international focus) code were associated with higher value creation.

研究目的

本文旨在研究於第五和第六波的併購浪潮中為增長而作出的策略性收購的市場表現;本文亦概述在這些極其複雜的和極具挑戰性的公司交易中影響作收購公司的表現的主要因素.

研究設計/方法/理念

為了能進行定量分析,研究人員收集在第五及第六波的併購浪潮中以策略性增長為唯一目的的收購個案、建立一個獨特的數據樣本。研究人員首先以基於市場的事件研究法分析那些進行了收購的公司的表現,並以單變量/多變項迴歸分析法去試驗那幾個透過深入的文獻研究而找到的非會計的決定因素的影響.

研究結果

研究得出的新發現是、如果以增長為目的的策略性收購是於國際間完成及涉及收購中型公司的話,則這收購行動會給進行收購的公司帶來更多價值。而且、如果收購目標的產業與作收購公司的不太相關的話 (2-標準產業分類),收購行動會為進行收購的公司帶來更強的表現、特別是在國際環境下進行這收購行動.

研究的原創性/價值

(1) 有別於現時其它於其分析中不區分交易理由的研究,本文明確地表示只集中探討那些以帶來策略性增長為主要目標的收購;因此、本研究對 (哈爾彭,1983年)(Halpern, 1983) 陳述的問題作出了回應。本研究的理念有助於減輕我們對收購結果的曲解,從而讓我們對策略性行動能作出可靠的評估. (2) 定量分析的結果、亦概述了以中型公司為目標的收購及更大程度的多樣化 (2-標準產業分類、以國際為焦點) 代碼與創造更大價值是有關聯的。

對日後研究的作用/實際影響

本研究的結果對學術界及管理人員均具吸引力,亦為策略規劃提供一個額外的工具.

對社會的影響

本研究可帶來可持續的及可創造價值的增長動力,又可鼓勵行政主管採用以價值為本的領導方針.

Details

European Journal of Management and Business Economics, vol. 30 no. 3
Type: Research Article
ISSN: 2444-8451

Keywords

Open Access
Article
Publication date: 29 July 2020

Anna Aleksandra Lupina-Wegener, Shuang Liang, Rolf van Dick and Johannes Ullrich

Building on social identity theory, the purpose of this paper is to examine how European managers construct their multiple identities after being acquired by a Chinese firm and to…

2253

Abstract

Purpose

Building on social identity theory, the purpose of this paper is to examine how European managers construct their multiple identities after being acquired by a Chinese firm and to determine the key factors contributing to the changing dynamics of multiple organizational identities.

Design/methodology/approach

The paper presents a qualitative, single case study of a Chinese acquisition of a European manufacturing firm at two points in time.

Findings

We find that multiple identities initially trigger ambivalence toward the acquisition, but over time, the ambivalence diminishes. The reduction of ambivalence results from concurrent integration and separation: a newly constructed boundary spanning the organization separates positive identities from negative ones, and integration interventions foster the development of a new, shared identity.

Originality/value

The findings reveal that organizational identity change is facilitated by the aligning of a post-merger identity with the acquired organization's historical identity and by creating an ambivalent boundary spanning identity.

Details

Journal of Organizational Change Management, vol. 33 no. 7
Type: Research Article
ISSN: 0953-4814

Keywords

Open Access
Article
Publication date: 20 November 2020

Viet Anh Hoang, Man Dang, Ngoc Vu Nguyen, Ngoc Thang Nguyen and Darren Henry

The purpose of this paper is to investigate the effects of cross-country characteristics on acquirers' target status choice in cross-border mergers and acquisitions across 41…

1553

Abstract

Purpose

The purpose of this paper is to investigate the effects of cross-country characteristics on acquirers' target status choice in cross-border mergers and acquisitions across 41 emerging markets.

Design/methodology/approach

The paper first reviews the existing literature and develops the related hypotheses, in conjunction with the objectives of this paper. We then describe the data employed, variable measurement and examine the effects of cross-country characteristics on the acquirers' target status choice in cross-border mergers and acquisitions while controlling for firm-level and deal-specific characteristics. The paper continues to conduct the robustness check on cross-country determinants of target status choices using the difference independent variables rather than target country-level variables only.

Findings

This research found that the likelihood of a public firm acquired relative to private one is higher if the target firm is located in countries with stronger government quality, weaker economic freedom, better financial market development and lower cultural distance between the host and home countries. The results suggest that bidders actively assess cross-country characteristics as part of their acquisition planning.

Originality/value

Rather than commonly analysed determinants in the previous research such as firm- and deal-specific attributes, value creation and shareholder protection, this paper indicates that institutional environments and economic conditions are closely associated with acquisition risks and benefits and have direct influences on bidder firms' acquisition bidding planning and target choice decision-making.

Details

Journal of Economics and Development, vol. 23 no. 2
Type: Research Article
ISSN: 1859-0020

Keywords

Open Access
Article
Publication date: 17 December 2021

Ali İhsan Akgün

The study aims to identify whether international financial reporting standards (IFRS) or local generally accepted accounting principles (GAAP) reporting provides investors and

2263

Abstract

Purpose

The study aims to identify whether international financial reporting standards (IFRS) or local generally accepted accounting principles (GAAP) reporting provides investors and senior management of acquirer banks with superior information on target banks under post-merger bank performance.

Design/methodology/approach

The authors examine the claim that IFRS improves corporate transparency and increases financial reporting quality in European Bank merger and acquisitions (M&As). The authors compare the financial performance of merged banks where the target and acquirer banks employed the same reporting system (up to 305 merged banks) to the performance of a control group of banks not engaged in M&A activity (up to 1,690 European banks).

Findings

Local GAAP reporting allows a more transparent assessment of financial performance using traditional indicators, making it a superior tool for assessing potential acquisition targets.

Practical implications

Overall, the empirical findings are consistent with prior studies and indicate a significant relationship between local GAAP and post-merger performance, while IFRS does not contribute to post-merger bank performance.

Originality/value

The study is one of the very few studies to investigate the relationship between bank performance, M&A activity and accounting standards in EU-28 countries. The primary contribution the finding of poor performance of IFRS reporting merged banks compared to local GAAP banks in EU-28 countries in line with prior results of Huian (2012). In addition, several deal- and bank-specific characteristics that affect accounting standards influence M&A transactions in European banks.

Details

Journal of Capital Markets Studies, vol. 6 no. 1
Type: Research Article
ISSN: 2514-4774

Keywords

Open Access
Article
Publication date: 6 April 2022

Güldem Karamustafa-Köse, Susan C. Schneider and Jeff D. Davis

Despite best intentions, mergers and acquisitions often do not live up to the expectations for performance. This study examined how the salience of multiple identities creates…

1524

Abstract

Purpose

Despite best intentions, mergers and acquisitions often do not live up to the expectations for performance. This study examined how the salience of multiple identities creates dynamics in postmerger integration processes and how these dynamics influence the acquisition of the target's capabilities.

Design/methodology/approach

The authors conducted an in-depth case study of a large American consumer goods multinational corporation's acquisition of a family-owned German beauty business and examined responses to decisions and events during the postmerger integration process.

Findings

The results show how and why efforts to acquire unique target capabilities might not deliver the hoped-for results. The authors discovered multiple identities that became salient during the postmerger integration process which subsequently influenced interpretations and reactions to decisions and events and which created intergroup dynamics. The authors also noted the role of language in making these identities salient. Such dynamics pose challenges to managing the postmerger integration process and to acquiring sought after capabilities.

Originality/value

This study reveals how different identities become salient in the interpretation of particular events and decisions, resulting in emotional and behavioral reactions and intergroup dynamics. Furthermore, it uncovers the role of language in making identities salient. This study offers further insight into identity dynamics when the capability of the target firm is the motive of the acquisition.

Details

Journal of Organizational Change Management, vol. 35 no. 8
Type: Research Article
ISSN: 0953-4814

Keywords

Open Access
Article
Publication date: 16 March 2023

Jarno Lähteenmäki and Juuso Töyli

The purpose of this paper is to enlighten the intriguing process of industry asset consolidation. It is critical for firms to manage their business acquisitions strategically for…

1973

Abstract

Purpose

The purpose of this paper is to enlighten the intriguing process of industry asset consolidation. It is critical for firms to manage their business acquisitions strategically for survival in this industry life cycle process, which develops through multiple company mergers. The companies extensively acquiring industry assets have utilized acquisition programs consisting of both pre-acquisition strategizing and post-acquisition integration; however, the existing literature on acquisition programs focuses on post-acquisition integration activities. This study aims to bridge this gap.

Design/methodology/approach

This study focuses on pre-acquisition strategizing of acquisition programs and proposes a model in which an acquiring company could manage its acquisitions for industry asset consolidation over the industry evolution.

Findings

Empirically, in the multi-case study of telecommunications infrastructure companies, the authors collect an extensive set of archival records accumulated over the whole industry life-cycle, spanning more than 30 years, and they apply a qualitative data analysis to reveal strategic actions within the companies.

Research limitations/implications

The discoveries elaborate on activities comprising the acquisition process model: social legitimacy, strategic alignment, resource fulfillment, consolidation pursuit and merging.

Practical implications

The counterintuitive findings are that the companies strived to ensure legitimacy early in the telecommunication infrastructure markets before they reached strategic alignment with their owners.

Originality/value

The results extend the understanding of industry asset consolidation as an organization-level phenomenon and show how contextual factors connected to industry life-cycle phases, such as regulatory regimes and financial cycles and industry evolution, influence the attributions of an acquisition program.

Details

Journal of Strategy and Management, vol. 16 no. 3
Type: Research Article
ISSN: 1755-425X

Keywords

Open Access
Article
Publication date: 10 July 2019

Yao Cheng

The purpose of this paper is to examine the effects of the post-merger integration duration on acquiring firms’ leverage behavior before and after a merger, using a dynamic model…

1757

Abstract

Purpose

The purpose of this paper is to examine the effects of the post-merger integration duration on acquiring firms’ leverage behavior before and after a merger, using a dynamic model in which full merger benefits cannot be consumed at the instant of a merger, but rather after a pre-specified post-merger integration period.

Design/methodology/approach

This paper presents a dynamic model and empirical tests that describe the impact of the post-merger integration period on the capital structure dynamics of the acquiring and target firms prior to a merger and during the post-merger integration period. By incorporating costs associated with the post-merger integration period, the model can provide new implications for the leverage behavior around the merger.

Findings

Empirical tests support the model implications by showing that the longer the expected post-merger integration process, the less likely the acquirer will structure the financing of the combined firm in a manner that increases firm leverage. Since integration takes time to complete, an acquirer tends to retain financial flexibility during the integration process by assuming lower levels of debt when determining the capital structure of the merged entity.

Originality/value

The model generates new implications related to acquiring firms’ leverage dynamics along with the method of payment choice. The analysis of the duration of the post-merger integration period extends both the theoretical and empirical literature that tacitly assumes that the merger-related synergy is realized immediately at the merger date. This is the first model in the literature that assumes that both the acquiring and the target firms can change their capital structure overtime, which allows us to analyze both the financing structure and the merger timing. Previous empirical studies also ignore the integration period in the analysis of the method of payment choice and leverage behavior around mergers. The model in this paper can be extended along a number of dimensions.

Details

Managerial Finance, vol. 45 no. 10/11
Type: Research Article
ISSN: 0307-4358

Keywords

Open Access
Article
Publication date: 1 August 2019

Alex Lundqvist, Eva Liljeblom, Anders Löflund and Benjamin Maury

The cultural and legal differences between foreign acquirers and African target firms can be substantial. There is also a large variation in cultures and legal systems within…

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Abstract

Purpose

The cultural and legal differences between foreign acquirers and African target firms can be substantial. There is also a large variation in cultures and legal systems within Africa. However, there is limited research on merger and acquisition (M&A) performance by foreign firms in Africa. The purpose of this paper is to fill this gap by exploring the “spillover by law” hypothesis (Martynova and Renneboog, 2008) that focuses on the influence of the external environment on the governance and performance of foreign M&As in Africa.

Design/methodology/approach

The data set covers 415 M&A transactions by foreign firms in Africa during the period of 1999–2016. Dynamic data covering the country’s legal, cultural and political environment are collected from the World Bank, the Heritage Foundation and Transparency International.

Findings

The authors find that the legal environment significantly affects the returns of bidders on African firms. For complete acquisitions, bidder returns are significantly higher when the bidder’s country has higher shareholder protection and higher creditor protection compared with the target firm’s country. The results show that the effects are significant when there is a full control change (including a change in the target firm’s nationality) but not in the case of partial control transfers. The results are consistent with the “spillover by law” hypothesis.

Originality/value

The authors contribute to the literature on cross-border M&As by separately studying the valuation effects of full, majority and minority changes in control; by being the first study of the legal spillover effects in Africa; and by being the most extensive study of the legal determinants of the valuations of non-African acquirers of African firms.

Details

International Journal of Emerging Markets, vol. 14 no. 5
Type: Research Article
ISSN: 1746-8809

Keywords

Open Access
Article
Publication date: 6 April 2021

Johan Holtström and Helén Anderson

This study aims to contribute with an extended framework on synergy realisation in acquisitions. The study conceptualises synergy realisation after acquisitions, in interaction…

6280

Abstract

Purpose

This study aims to contribute with an extended framework on synergy realisation in acquisitions. The study conceptualises synergy realisation after acquisitions, in interaction with other companies in a business network and that synergy can be the result of both intended and not intended actions.

Design/methodology/approach

The study is based on a company involved in acquisitions, being both the acquirer and the acquired. The data for analysis were collected through semi-structured interviews with managers involved in the described acquisition processes. The semi-structured interviews were guided by overarching themes to cover relevant areas of the described acquisitions.

Findings

This study develops a framework in which synergy is used as a concept in business networks. The framework offers a more dynamic perspective on acquisition processes and extends the view of acquisition performance beyond more financial and company internal aspects of acquisition processes. Further, the findings show that related companies such as customers and suppliers, play important roles in synergy realisation.

Practical implications

From a managerial perspective, the study shows the importance of understanding the underlying forces of integration processes.

Originality/value

The concept of synergy used in this study not only includes the companies integrated in an acquisition but also their business networks. Including the integrated companies and their business networks provides a more dynamic perspective from which to plan and realise synergy.

Details

Journal of Business & Industrial Marketing, vol. 36 no. 13
Type: Research Article
ISSN: 0885-8624

Keywords

Open Access
Article
Publication date: 26 November 2020

Sena Kimm Gnangnon

This paper aims to examine how the volatility of foreign direct investment (FDI) inflows affects the volatility of corporate income tax revenue.

2392

Abstract

Purpose

This paper aims to examine how the volatility of foreign direct investment (FDI) inflows affects the volatility of corporate income tax revenue.

Design/methodology/approach

The study has used an unbalanced panel data set of 129 countries over the period 1981–2016 and the two-step system generalized methods of moment approach to perform the empirical analysis.

Findings

The main findings are that FDI volatility enhances the volatility of corporate income tax revenue in less advanced economies, but reduces it in relatively advanced countries. The positive corporate income tax revenue volatility effect of FDI inflows is far higher in non-tax haven countries than in tax haven countries. Additionally, FDI volatility exerts a higher positive effect on corporate income tax revenue volatility as countries experience greater dependence on natural resources. Finally, the positive effect of FDI volatility on corporate income tax revenue volatility is further amplified by higher FDI volatility.

Research limitations/implications

One important limitation of the present analysis is the use of aggregate FDI inflows because of the lack of data over a long period on greenfield FDI inflows and cross-border mergers and acquisitions FDI inflows. Therefore, an avenue for future research could be to explore separately the effect of the volatility greenfield FDI inflows and the volatility of cross-border mergers and acquisitions FDI inflows on the volatility of corporate income tax revenue, when long-time series data (covering many countries) would be available.

Practical implications

These outcomes particularly shed light on the role of FDI volatility on the volatility of corporate income tax revenue, particularly in countries that are highly dependent on natural resources. Foreign capital flows, notably FDI flows, play an essential role for countries’ economic development through, inter alia, technology transfer, jobs creation and economic growth. Policymakers should aim to attract FDI, while also reducing their volatility, by designing and implementing policies and measures (such as those in favor of business environment improvement, property rights enforcement and political stability) that would assure foreign investors of the continuous high returns of their investments.

Originality/value

To the best of the author’s knowledge, this is the first time this topic is being addressed empirically in the literature.

Details

Applied Economic Analysis, vol. 29 no. 86
Type: Research Article
ISSN:

Keywords

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