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Book part
Publication date: 12 November 2015

Seonghee Oak and Michael C. Dalbor

Mergers and acquisitions are frequent occurrences in the world of business. While a merged firm may convert an acquired asset to other brands, the restaurant industry…

Abstract

Mergers and acquisitions are frequent occurrences in the world of business. While a merged firm may convert an acquired asset to other brands, the restaurant industry tends to acquire the same brand name and does not change the name of the acquired assets. Acquisitions can prove to be a risky proposition in any industry. This study attempts to determine if a product-diversified acquisition in the restaurant industry is a value-creating decision. By comparing focused and diversified acquisitions, we try to find if focused acquisitions create value and that diversified acquisitions do not. Our initial expectation was that focused acquisitions create more shareholder value. We find that both focused and diversified acquisitions make significant positive abnormal returns for acquirers.

Details

Advances in Hospitality and Leisure
Type: Book
ISBN: 978-1-78560-271-9

Keywords

Book part
Publication date: 21 July 2004

Kwang-Hyun Chung

Acquisition is one of key corporate strategic decisions for firms’ growth and competitive advantage. Firms: (1) diversify through acquisition to balance cash flows and…

Abstract

Acquisition is one of key corporate strategic decisions for firms’ growth and competitive advantage. Firms: (1) diversify through acquisition to balance cash flows and spread the business risks; and (2) eliminate their competitors through acquisition by acquiring new technology, new operating capabilities, process innovations, specialized managerial expertise, and market position. Thus, firms acquire either unrelated or related business based on their strategic motivations, such as diversifying their business lines or improving market power in the same business line. These different motivations may be related to their assessment of market growth, firms’ competitive position, and top management’s compensation. Thus, it is hypothesized that firms’ acquisition decisions may be related to their industry growth potential, post-acquisition firm growth, market share change, and CEO’s compensation composition between cash and equity. In addition, for the two alternative acquisition accounting methods allowed until recently, a test is made if the type of acquisition is related to the choice of accounting methods. This study classifies firms’ acquisitions as related or unrelated, based on the standard industrial classification (SIC) codes for both acquiring and target firms. The empirical tests are, first, based on all the acquisition cases regardless of the firm membership, and then, deal with the firms acquiring only related businesses or unrelated businesses exclusively.

The type of acquisitions was more likely related to industry growth opportunities, indicating that the unrelated acquisition cases are more likely to be followed by higher industry growth rate than the related acquisition cases. While there were a substantially larger number of acquisition cases using the purchase method, the related acquisition cases used the pooling-of-interest method more frequently than in the unrelated acquisition cases. The firm-level analysis shows that the type of acquisition decisions was still related to acquiring firms’ industry growth rate. However, the post-acquisition performance measures, using firm’s growth and change in market share, could support prior studies in that the exclusive-related acquisitions helped firms grow more and get more market share than the exclusive-unrelated acquisitions. CEO’s compensation composition ratio was not related to the types of acquisition.

Details

Advances in Management Accounting
Type: Book
ISBN: 978-0-76231-118-7

Book part
Publication date: 1 January 2004

Annetta Fortune

Merger and acquisition activity generates a substantial amount of discussion within business circles among academics, analysts, and the media. Even though research and…

Abstract

Merger and acquisition activity generates a substantial amount of discussion within business circles among academics, analysts, and the media. Even though research and experience demonstrates that many mergers and acquisitions fall short of the intended goal of creating shareholder value, mergers and acquisitions still persist in the marketplace. The purpose of this discussion is to suggest that a potential explanation for this dilemma can be found by applying the resource-based rationale of acquisition within an evolutionary framework of business dynamics.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-0-76231-172-9

Article
Publication date: 3 August 2022

Nadia Hanif, Jianfeng Wu and Kenneth A. Grant

The purpose of this study is to test a model for cross-border technological acquisitions (CBTAs) focusing on the level of ownership acquired in the target firm and the…

Abstract

Purpose

The purpose of this study is to test a model for cross-border technological acquisitions (CBTAs) focusing on the level of ownership acquired in the target firm and the acquiring firm's post-acquisition innovation performance (PAIP), with the degree of integration as a mediator, based on the dynamic capability perspective of the resource-based view. This study further concludes the role of the country-of-origin effect (COE) (when emerging economies' acquiring firms purchase technological resources from developed economies' target firms) on the success of the acquiring firms in CBTAs.

Design/methodology/approach

Data on CBTAs initiated by 542 acquiring firms was quantified from four high technology industries from 1995 to 2015 for the empirical investigation of the research hypotheses. Hierarchical fixed year effect negative binomial regression technique was used to analyze the proposed model for the success of CBTAs.

Findings

The analysis of the CBTAs confirmed that acquiring firms who opt for a higher level of acquired ownership strategy increase the degree of integration of the target firm's technological resource stock. The level of acquired ownership improves the PAIP of the acquiring firms; however, the degree of integration positively accelerates the relationship between the acquired ownership and the PAIP. Considering the COE, acquiring firms that initiated CBTAs from emerging economies to purchase technological resources from developed economies' targets have firm-specific technological capability holes to execute the integration, which negatively impacts the emerging economies acquiring firm's PAIP.

Originality/value

This study contributes to the CBTAs literature by exploring the enabling role of the degree of integration between the level of acquired ownership and the PAIP of the acquiring firms. Further, this study put forward empirics on the COE of the acquiring firms for their integrative capability to integrate the target firm's resource stock and subsequent innovation performance.

Details

Review of International Business and Strategy, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2059-6014

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Article
Publication date: 7 June 2022

Stephanie Tonn Goulart Moura, Christian Falaster and Bernardo Silva-Rêgo

Cultural distance can be a challenge for internationalization. However, in some instances, it is possible that different cultures could represent a benefit for…

Abstract

Purpose

Cultural distance can be a challenge for internationalization. However, in some instances, it is possible that different cultures could represent a benefit for multinational enterprises (MNEs) from emerging contexts. Drawing on the knowledge-based view (KBV), the authors propose that greater cultural distances lead to benefits for multinationals seeking to absorb new knowledge overseas.

Design/methodology/approach

The authors performed ordinary least squares regressions with moderation tests over a database containing 101 cross-border acquisitions to test the study’s hypotheses. The acquisitions were performed by Brazilian firms between 1995 and 2015, targeting 24 host countries.

Findings

The study’s results indicate that cultural distance positively affects the firm's post-acquisition performance and that absorptive capacity moderates these results, improving the positive effect. The study suggests that cultural diversity is an asset for the multinationals in question.

Practical implications

When deciding to invest in a foreign country, managers should consider this cultural diversity as one more value creation driver, especially if the firm has well-developed innovation capabilities.

Originality/value

The study’s findings contribute to the international business literature providing further evidence that emerging markets multinationals can create value in acquisitions through the firm's abilities to exploit cultural asymmetries. Thus, the authors also emphasize that absorptive capacity plays a strategic role in multinational's international strategies.

Details

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

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Article
Publication date: 1 January 1993

Roger Cook

First of two articles outlining the role of Internal Audit (IA) inacquisitions activity. The independence and objectivity of IA mean thatit can contribute significantly to…

Abstract

First of two articles outlining the role of Internal Audit (IA) in acquisitions activity. The independence and objectivity of IA mean that it can contribute significantly to acquisitions activity, provided it has sufficient organizational status, and business awareness. In screening acquisition candidates, scrutiny of the business environment is as important as the analysis of results to date. The potential “fit” between the prospective parent and the subsidiary should be reviewed, as well as the suitability and readiness of the acquirer to manage diversified activities. Acquisitions provide a “high‐risk, high growth” path and IA should participate as early as possible in preparations for diversification.

Details

Managerial Auditing Journal, vol. 8 no. 1
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 1 May 1990

Jim Hamill and John Crosbie

Despite the euphoria surrounding 1992, the recent internationalexpansion of British retail organisations has been oriented mainlytowards the US. Such expansion has…

Abstract

Despite the euphoria surrounding 1992, the recent international expansion of British retail organisations has been oriented mainly towards the US. Such expansion has predominantly taken the form of the acquisition of US retailers, rather than through the establishment of greenfield stores. As a consequence of their US acquisitions, a number of British retailers are now well established across the Atlantic. Some reorientation of the geographical focus of British retail acquisitions abroad, however, may be necessary to reap the expected benefits of the Single European Market. British retail acquisitions in the US are examined in the years between 1984 and 1989 with particular emphasis on acquisition strategy, motivations, performance and the impact of 1992.

Details

International Journal of Retail & Distribution Management, vol. 18 no. 5
Type: Research Article
ISSN: 0959-0552

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Article
Publication date: 12 September 2016

Atul Arun Pathak

This paper aims to focus on Tata Motors, an automobile company from an emerging market, and its successful acquisition of two global marquee car brands in Jaguar and Land…

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Abstract

Purpose

This paper aims to focus on Tata Motors, an automobile company from an emerging market, and its successful acquisition of two global marquee car brands in Jaguar and Land Rover (JLR). It traces the evolution of JLR under the stewardship of Tata Motors over an eight-year long period and examines the strategic reasons for the success of the acquisition.

Design/methodology/approach

The paper approaches strategic issues in cross-border acquisitions using an illustration of a successful deal. It is based on statements of leaders and secondary data about the acquirer and acquired organizations. The paper explores the strategic challenges faced when emerging market firms carry out cross border acquisition deals. It recommends the short-term and long-term strategies that acquirers can follow to improve the chances of a successful acquisition.

Findings

Any acquisition is challenging. Cross-border acquisitions face greater challenges, especially if the acquirer is from an emerging market country while the target company is from a developed country. Success of the acquisition, especially over the long run, depends on both internal factors that are under the control of the acquirer’s management, as well as external environmental factors that it needs to address. Both patience and luck are required ingredients for success in such contexts.

Practical implications

While the general temptation in any acquisition is to extract synergies as quickly as possible, the Tata Motors’ acquisition of JLR is an exception. Tata Motors carefully handled short-term challenges and continued to invest in the core competencies of JLR and reaped benefits over the long run. It was also fortunate that a variety of factors in the external environment turned favorable for Tata Motors and JLR in the eight years since the deal took place.

Social implications

It concedes that during an M&A deal, the leaders of a seller organization may be nervous about their future. JLR trade union leaders were initially not sure whether jobs in UK would remain secure. To ensure success of the deal, the leaders of the acquirer firm need to balance the interests of multiple stakeholders, both in the short-term, as well as over a longer-term perspective.

Originality/value

The paper considers the Tata Motors’ acquisition of JLR. It is an example of a large, difficult cross-border acquisition by an emerging market based company. While the acquisition proved difficult in the short term, it has yielded excellent dividends to the parent company over the long term. This paper explores the reasons why this cross-border acquisition succeeded and recommends strategies that other companies considering cross-border acquisitions can consider to improve their chances of success.

Details

Strategic Direction, vol. 32 no. 9
Type: Research Article
ISSN: 0258-0543

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Article
Publication date: 27 June 2008

Christopher B. Malone and Zicheng Ou

To examine Australian corporate acquisitions data in the context of contemporary acquisitions theory.

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Abstract

Purpose

To examine Australian corporate acquisitions data in the context of contemporary acquisitions theory.

Design/methodology/approach

Empirical analysis using event study procedures.

Findings

The study of Australian acquisitions shows that domestic acquisitions are more likely to produce favourable market responses for acquirers than foreign direct investment actions. Companies with recent upwards price momentum are also more likely to engage in successful acquisitions. However, the relative “valuation” of acquirers appears to be unimportant in the Australian acquisitions process. The results are linked to the smaller, more isolated, nature of the Australian economy.

Research limitations/implications

A long horizon event study methodology could be used. Alternative treatments could be used to assess relative value and competitive advantage. Other smaller isolated markets, similar to Australia, could be considered.

Originality/value

The use of international corporate acquisitions data, from Australia, supports both Competitive Advantage Theory and Market Driven Acquisitions Theory. There is little evidence to suggest that Cheap Capital motivates a large number of acquisition actions. The results are linked to the smaller, more isolated, nature of the Australian economy, and show that recent price momentum and the location of the investment are important. This latter finding suggests a form of market segmentation still prevails.

Details

International Journal of Managerial Finance, vol. 4 no. 3
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 1 April 2002

John G. Lynch and Barbara Lind

Is the average M&A adventure just an executive ego trip? Is it management folly, or can it be done so that it reliably produces growth? A model presented here may help…

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Abstract

Is the average M&A adventure just an executive ego trip? Is it management folly, or can it be done so that it reliably produces growth? A model presented here may help executives who are engaged in making acquisitions and making them work navigate the shoals of mergers and acquisitions more successfully.

Details

Strategy & Leadership, vol. 30 no. 2
Type: Research Article
ISSN: 1087-8572

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