Matching Industries between Target and Acquirer in High-Tech Mergers and Acquisitions

Mergers and acquisitions (M&As) have been regarded as a highly viable option for fostering innovation, gaining new products or services, and gaining access to new markets in high technology firms. This study analyzes several alternative variables that impact M&A choices by analyzing their relationship to the industry of both the acquirer and target. Results support two hypotheses implying that (1) M&A transactions with the same acquirer and target industry are more likely to be acquisitions that delivers a greater final share of the target organization to the acquirer, and (2) acquirers are more likely to invest greater dollar amounts in targets that have the same primary industry.     

Integration and autonomy in Chinese technology-sourcing cross-border M&As: from the perspective of resource similarity and resource complementarity

In this paper, we examine the match between resource relatedness and post-merger integration on technology innovation of acquiring firms to find the rationale behind technology-sourcing cross-border mergers and acquisitions (M&As) of Chinese multinational enterprises. Using a sample of 88 Chinese technology-sourcing cross-border M&As, we find that the acquirer will improve technology innovation when greater resource similarity between the acquirer and target firms is matched with a high integration degree and a low target autonomy level. Meanwhile, the acquirer can improve technology innovation when greater resource complementarity is matched with a low level of integration degree in technology-sourcing cross-border M&As. This paper provides the acquiring firms with fresh ideas of how to make the integration decisions of technology-sourcing overseas M&As. We hope to help multinational enterprises to achieve more outstanding technology innovation performance through technology-sourcing overseas M&As in an intense global competitive environment.     

Technology-acquiring cross-border M&As by emerging market firms: role of bilateral trade openness

This paper investigates the role of bilateral trade openness in technology-acquiring cross-border mergers and acquisitions (M&As) by emerging market firms (EMFs). The cross-border M&A, patents, and financial data from January 2000 to December 2013 have been utilised for empirical analyses. By analysing cumulative abnormal returns of the acquirer EMFs from Brazil, Russia, China, India, and Mexico, the value-creating nature of technology-acquiring cross-border M&As has been confirmed. In addition, the number of the patents owned by the target firms showed a positive and significant effect on the stock performance of cross-border acquirers. Finally, the bilateral trade openness significantly and positively moderated the relation between the innovation capability of the target firms and EMFs’ stock performance.     

Credit supply,post-acquisition performance and financial constraints

We study the effect of credit supply on the acquisition behaviour of financially constrained (FC) and financially unconstrained (UC) firms. FC firms are likely to conduct acquisitions when credit supply is greater while UC firms can conduct acquisitions whenever a good opportunity arises. We argue that the flexibility unconstrained firms have is valuable. Our empirical results indicate that UC firms outperform FC firms up to 36 months after the acquisition. We also find that increased credit supply increases the probability of conducting mergers and acquisitions (M&As) for FC firms while it has less impact on M&A behaviour of UC firms.     

The effect of heterogeneous beliefs on mergers and acquisitions

This article investigates the effect of heterogeneous beliefs on firms’ mergers and acquisitions (M&A) decisions. Using data of China’s financial market, which is featured with great heterogeneity of belief, we find that heterogeneous beliefs are positively associated with the occurrence of M&A transactions, and firms with greater heterogeneous beliefs are more likely to pay the transactions with stock. Moreover, we show that government intervention, measured by state ownership, weakens the effect of heterogeneous beliefs on firms’ M&A decisions.     

Economic policy uncertainty and mergers and acquisitions: Evidence from China

This study examines the relationship between economic policy uncertainty and mergers and acquisitions (M&As) in China. Using all listed Chinese companies on the Shanghai and Shenzhen Stock Exchanges as well as 4188 ​M&A deals from the period of 2001–2018, we show that Chinese firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behavior of US firms. We further show that state-owned enterprises (SOEs) are less likely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. SOEs are less likely to use only cash for their acquisitions during periods of high economic policy uncertainty. These results indicate the prudence of SOEs regarding acquisitions relative to non-SOEs during periods of high economic policy uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholder wealth for acquirers, and this wealth effect is more pronounced for SOEs.     

收购方为什么要在兼并交易中雇用投资银行

本文考察了当兼并交易具有哪些特征时,收购方公司更可能会在兼并交易中雇用投资银行作为其兼并交易的财务顾问。研究结果表明,在下列情况下,收购方公司更有可能雇用投资银行作为其兼并交易的财务顾问：兼并交易较复杂,收购方公司的兼并交易经验不足,收购方公司仅收购目标公司部分资产或股权,兼并交易价格较高,兼并交易为敌意收购,收购方公司在金融行业运营,目标公司在很多行业经营。     

A structural event study for M&As: an application in corporate governance

We apply structural event study methodology in the context of corporate governance to account for the interaction of two merger and acquisition (M&A) effects: synergy (total value) and dominance (bargaining power). The interaction of these effects simultaneously determines the parties’ abnormal returns. We posit that M&A synergy effects correspond to changes in agency costs between target’s management and target’s shareholders, while the dominance effects correspond to the balance of power between acquirer and target during negotiations. Our structural estimates suggest that more stable or entrenched directors generate higher value during normal operations but are softer negotiators when their firm becomes an acquisition target.     

Determinants of the acquisition of listed versus unlisted firms in different legal and institutional environments

The aim of this article is to analyse the determinants of the decision to acquire unlisted rather than listed firms in different legal and institutional environments. We estimate a probit model considering the mergers and acquisitions (M&As) announced by European listed firms (19 countries) that acquires worldwide listed or unlisted firms (36 countries) in the period 2002–2007. Our results show that managerial opportunism is a determinant in the acquisition of listed firms, occurring with greater probability in acquiring countries with low shareholder and minority shareholder protection. Information asymmetry is another relevant determinant that promotes the acquisitions of unlisted firms. Furthermore, the less developed the capital market in the country of the acquired firm, the greater the probability of acquisitions of unlisted firms. This article contributes to the M&A literature by showing that in addition to managerial opportunism and information asymmetry, the legal and institutional environments in both the acquiring and the target countries are also relevant aspects explaining the decision of whether to acquire listed or unlisted firms.     

The triggers and clustering properties of merger waves

This article studies the triggers and the agglomeration of mergers and acquisitions (M&A) activity within clusters constituted by time, market and industry. Based on almost 500,000 individual transactions, we find that industry factors play a significant role in triggering activity and that M&A agglomerates strongly across related industries. While clustering in time turns out to be insignificant, stock market effects can be either an attracting or a repelling force, depending on the type of deal examined. This supports the view that merger waves are largely driven by industry shocks.     

International production chains and the pollution offshoring hypothesis: An empirical investigation

Most analyses of the impact of heterogeneous environmental policy stringency on the location of industrial firms have considered the relocation of entire activities – the well-known pollution haven hypothesis. Yet international enterprises may decide to only offshore a subset of their production chain – the so-called pollution offshoring hypothesis (POH). We introduce a simple empirical approach to test the POH combining a comprehensive industrial mergers and acquisitions dataset, a measure of sectoral linkages based on input-output tables and an index score of environmental policy stringency. Our results confirm the impact of relative environmental policy stringency on firms’ decisions to engage in cross-country M&As. Our findings also indicate that environmental taxation have a stronger impact on international investment decisions than standards-based policies. Further, we find that transactions involving a target firm operating in a sector upstream of the acquirer are more sensitive to environmental policy stringency, especially when that sector is highly pollution-intensive. This empirical evidence is consistent with the pollution offshoring hypothesis.     

Diplomatic relations and cross-border investments in the European Union

This study investigates the extent to which diplomatic relations are related to cross-border merger and acquisition (M&A) activities in the European Union during the years 2001–2019. Implementing a gravity model, we find a positive relationship between diplomatic distance and M&A activities, meaning that weaker diplomatic relations are linked to increases in inward M&As. This finding holds when foreign investors target high-tech firms, are private rather than state-owned enterprises, or buy larger shares of the target companies. This evidence suggests that cross-border acquisitions could be a way for the investing firm to mitigate issues related to weak diplomatic relations, such as access to host markets’ information and technological knowledge.     

Exchange rate pass-through in Turkish export and import prices

This article investigates the effects of horizontal acquisitions on the performance of target firms in the 1990s. Using French manufacturing firm-level data, we examine two main indicators of performance: the profit and the productive efficiency. We distinguish domestic from cross-border acquisitions. To evaluate the impact of take-overs, we implement appropriate difference-in-difference estimation techniques associated to a matching propensity score procedure. We find that Mergers &?Acquisitions (M&A) do not increase the profit of French target firms, even on the long run. However, they clearly raise the productivity of target firms. These results suggest that firms probably redistribute efficiency gains at the upstream and/or downstream production stage. There is no evidence of an increase in market power. In addition, the consequences of domestic and cross-border M&A significantly differ. Efficiency gains are stronger for cross-border M&A. This conclusion is however true only for extra-European Union operations. The achievement in the European economic integration certainly explains the absence of difference between European and domestic acquisitions. Finally, our results cast some doubt on the frequent discrimination attitude towards foreign takeovers and the fears of their impact on firms’ performance and the host country's welfare.     

The Strategic Management of Mergers and Acquisitions in the Pharmaceutical Industry: Developing a Resource-based Perspective

There is a growing recognition within resource-based theory that mergers and acquisitions (M&A) can play an important role as a means of transferring otherwise non-marketable resources and capabilities. However, this resource-based view has yet to consider in detail the management process issues involved. This paper looks at three cases from the pharmaceutical industry and seeks to begin the development of a resource-based perspective on the management of M&A.     

Becoming an acquirer and becoming acquired

This paper considers mergers and acquisitions (M&A) in Finland. We explain the likelihood that a firm acquires or is acquired by another firm. We try to find out whether the incidences of M&A are influenced by the firms' R&D activity, measured by the calculated R&D stock. We obtained a very robust result, which says that R&D stock increases the probability that a firm acquires in all industries. In the nonprocessing industries, R&D stock similarly increases the probability that a firm is acquired by another. In the processing industries, the firm's own R&D stock has, however, zero impact on the likelihood that another firm buys a firm concerned. We interpret these results indicating that M&A are used as instruments to transmit knowledge from one firm to another. In the nonprocessing industries, it is evident that knowledge capital cumulated in the target is the main motivation for the purchase. Then a buyer's own R&D—which also increases the probability of the trade—signals that a buyer is efficient in absorbing the purchased new technology. In the processing industries, the motive for acquisition is different. We discovered that in the processing industries, technology is rather transmitted from the buyer's firm than to the purchased firm. It looks like that, in these industries, the firms have decreased their unit costs by means of their R&D activity, and so through M&A, the appeared unit cost differences have been levelled.     

人口流动推动了企业异地并购吗

本文以中国企业异地并购事件为研究对象,采用全国人口普查的微观数据,考察人口流动对企业并购的影响。结果表明,地级市之间流动人口的增加可以显著提高人口迁入地企业在迁出地进行并购投资的规模,且这一推动作用在高学历流动人口和从事金融行业的流动人口中更为明显。进一步研究发现,当目标公司所在地（人口迁出地）投资者保护程度越差、市场化程度越低、传统儒家文化越浓厚或当代文化包容度越低时,流动人口对企业异地并购的推动作用越强。本文揭示出流动人口可帮助企业在异地并购中消除投资壁垒,为户籍政策调整和促进企业跨区域投资提供了重要的政策启示。     

Cross-border mergers and acquisitions and the role of trade costs

Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in the number of cross-border M&As. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether trade costs affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.     

Paradigm Conflict and the Wealth Effects of Blockholder Formation in Private Target Acquisitions

Decision making in public companies follows an organized structure dominated by risk aversion. The decisions in private entrepreneurial firms tend to be driven by overconfidence and reliance on trial and error. Such entrepreneurial attitudes are reinforced by high levels of profitability. The authors argue that this difference in decision-making paradigms limits the wealth effect of blockholder formation by the profitable private target's owners in mergers and acquisitions. Blockholder formation by private target owners is associated with substantial acquirer shareholder gains in the acquisitions of targets with relatively low and moderate profitability levels. To the opposite, the market reacts to blockholder formation by the owners of highly profitable targets with skepticism. Such announcements are associated with insignificant wealth effects overall and substantial acquirer losses in acquisitions in human capital-intensive sectors whereby disagreements are likely to be consequential. Acquirers understand these wealth effects and reduce the extent of stock financing when acquiring highly profitable targets.     

Cross‐border mergers and acquisitions in services: The role of policy and industrial structure

This paper explores the role of policy and economic structure in determining international mergers and acquisitions (M&A) in services sectors. The analysis is based on bilateral sectoral M&A flow data and detailed information on policy barriers from a new database. Restrictive investment policies are found to reduce the probability of M&A inflows, controlling for bilateral frictions such as geography. This negative effect, however, is mitigated in countries with relatively large shares of manufacturing and (to a lesser extent) services in GDP. The same result holds for the number of M&A deals concluded. Findings are robust to accounting for the potential endogeneity of policy restrictiveness. The evidence suggests that the impact of policy is state‐dependent and related to the composition of GDP in the target economy.     

Fractional integration and cointegration in merger and acquisitions in the US petroleum industry

This article employs methodologies based on fractional integration and cointegration to analyse the time-series properties of merger and acquisitions (M&A) activity and crude oil prices in the US from 1980 to 2012. Our results indicate that an increase in the crude oil price produces a significant increase in the M&A data between 2 and 3 months after the initial shock.