Two ethical issues in mergers and acquisitions

With the recent rash of mergers and friendly and unfriendly takeovers, two important issues have not received sufficient attention as questionable ethical practices. One has to do with the rights of employees affected in mergers and acquisitions and the second concerns the responsibilities of shareholders during these activities. Although employees are drastically affected by a merger or an acquisition because in almost every case a number of jobs are shifted or even eliminated, employees at all levels are usually the last to find out about a merger transaction and have no part in the takeover decision. Second, if shareholders are the fiduciary beneficiaries of mergers and acquisitions, then it would appear that they have some responsibilities or obligations attached to these benefits, but little is said about such responsibilities. In this essay I shall analyze these two ethical issues, and at the end of the paper I shall suggest how they are related. Patricia H. Werhane is Professor of Philosophy at Loyola University of Chicago. She is one of the founding members of the Society for Business Ethics. Her publications include Philosophical Issues in Art, Ethical Issues in Business, coedited with Tom Donaldson, Persons, Rights and Corporations, Philosophical Issues in Human Rights, edited with D. Ozar and A. R. Gini.     

Analyzing determinants of value creation in domestic and cross border acquisitions in India

The present study seeks to assess the acquiring company announcement gains, and determinants thereof, in domestic and cross border acquisitions in India. For this purpose, 268 acquisitions comprising of 202 cross border acquisitions and 66 domestic acquisitions constitute the sample set. Standard event study methodology has been employed for computing the announcement returns. Further, regression analysis has been conducted to assess the sources of wealth gains in domestic and cross border acquisition. The results of event study indicate that cross border acquisitions have created significantly higher wealth gains than the domestic ones. Further, the results of regression analysis highlight that cross border acquisitions, pursued by the acquiring companies in technology intensive sector, for the target companies also in technology intensive sector, create superior wealth gains. The reason being, such cross border acquisitions provide an opportunity to the acquiring company to combine and judiciously utilize intangible resources of both the companies on a broader scale across new geographies. Thus, the study contributes to the existing literature on internalization theory by extending it to an emerging market like India.     

IP protection and ownership in cross-border acquisitions

We use the institutional theory to examine the impact of intellectual property protection on US multinational corporations (MNCs) ownership levels of their foreign acquisitions. Based on a sample of 7238 completed international M&A deals made by US MNCs from 1998 to 2017, we found that multinationals protect their intellectual property through more ownership when they are technologically intensive and invest more when IP protection is strong. However, IP protection negatively moderates the need for more ownership for technologically-intensive multinational corporations. Our results are robust to a battery of empirical tests, including a unique instrumental variable approach. This leads us to claim that our results are not merely correlated but are causal.     

Evaluating marketing assets in mergers and acquisitions

Marketing factors often explain why mergers and acquisitions subsequently succeed or fail. Here are guidelines for appraising the value of marketing assets of companies that are M&A candidates.     

Using qualitative research to address road transportation and safety issues in Vellore town,South India

Abstract

This study assessed the completeness of the Major Trauma Registry of Navarra (MTR-N) data and their concordance with the patients’ medical files. It retrospectively reviewed all the MTR-N cases documented in June and July of 2014 and 2015. For each case, 42 parameters’ values were taken from the MTR-N. To assess concordance between the MTR-N and medical files, the same variables values were re-recorded. Data completeness was calculated for all cases and data correctness for those documented in the MTR-N, separately for each variable. The overall average completeness rate for all variables was 92.8%. The percentages of completely missing data ranged from 0% (29 variables) to 76.8% (base excess). The overall average rate of correctness was 98.0%. Exact concordance ranged from 93.0% (7 variables) to 100% (22 variables). This study demonstrates the reliability and validity of the MTR-N data and its effectiveness for quality improvement and research in our community.     

我国跨国公司并购现状分析

近年来,我国在国际市场接连出手,跨国并购多个世界级企业。一方面,增强了我国跨国公司的整体实力,有利于学习外国先进管理经营方法;另一方面,大规模的跨国并购也产生了一系列问题。我们应该认识问题、解决问题,使我国跨国公司更高效的运转,更好地实行走出去战略。     

Idiosyncratic volatility and mergers and acquisitions in emerging markets

Given the recent findings in the literature that idiosyncratic volatility reflects stock price informativeness, we analyze the impact of idiosyncratic volatility on many acquisition parameters. We find that idiosyncratic volatility is positively related to acquisition premium; the relationship is more significant in deals that occurred in information-poor economies where acquirers have difficulty gathering information about the targets. These deals typically involve bidders from emerging markets and those that have less experience in the target country. Idiosyncratic volatility is also positively related to acquisition completion rate, the likelihood of the bidder acquiring majority control, but is negatively related to takeover probability.     

Executive migration and international mergers and acquisitions

This study applies the microfoundations approach to examine the impact of migrating executives on firms’ selection of host country in their international acquisition decisions. Viewing executive migration as a conduit for inter-organizational learning, this study offers the first empirical findings that a migrating executive’s inter-organizational learning associated with two specific types of international acquisition experience, i.e., general and country-specific, accumulated at a prior affiliated firm positively impacts host country selection in the executive’s current affiliated firm’s acquisition decisions. The findings further suggest that the migrating executive’s prior country-specific international acquisition experience has a greater influence compared with the migrating executive’s prior general international acquisition experience. Last, the findings show that industry similarity between a migrating executive’s prior and current affiliated firms enhances the effect of the migrating executive’s specific host country acquisition experience. In sum, this study contributes by introducing migrating executives as a new learning conduit in international acquisitions.     

The choice between joint ventures and acquisitions in foreign direct investments: The role of partial acquisitions and accrued experience

In order to avoid the liability of foreignness, firms invest in foreign countries pooling their own resources with those of local firms. This combination of assets may take place through joint ventures or acquisitions. When facing the need to choose between these two entry modes, managers find that there are two critical factors that have received little attention in previous research: the existence of different types of acquisitions—full acquisitions, pure partial acquisitions, and shared partial acquisitions—and the role of the experience accrued by the investing firm in carrying out investments through a particular entry mode. Both factors, as well as their managerial implications, are analyzed in this article. © 2004 Wiley Periodicals, Inc.     

Speed in acquisitions: A managerial framework

The advantage of speed is often invoked by academics and practitioners as an essential condition during post-acquisition integration, frequently without consideration of the impact earlier decisions have on acquisition speed. In this article, we examine the role speed plays in acquisitions across the acquisition process using research organized around characteristics that display complexity with respect to acquisition speed. We incorporate existing research with a process perspective of acquisitions in order to present trade-offs, and consider the influence of both stakeholders and the pre-deal-completion context on acquisition speed, as well as the organization’s capabilities to facilitating that speed. Observed trade-offs suggest both that acquisition speed often requires longer planning time before an acquisition and that associated decisions require managerial judgement. A framework for improving manager decisions during acquisitions is discussed and its implications for managers and research summarized.     

Evidence on real gains in corporate acquisitions

This study examines the change in operating performance of firms which merge for a sample of 324 combinations which occurred between 1967 and 1987. The results indicate that the performance of the merged firms typically improved following their combination. The results are not sensitive to factors such as offer size, industry relatedness between the bidder's and the target's businesses or bidder leverage. Separately, a positive association was found between the abnormal revaluation of the firms involved around the merger and the changes in operating performance observed. We conclude that the results documented in Healy et al. (1992) for a sample of 50 large mergers which occurred during the period 1979 through mid-1984 are not sensitive to sample size or to the period they investigated. The conclusions presented provide additional support for the idea that takeovers are motivated by expectations of improved performance due to the realization of synergistic benefits.     

Customer reactions to acquirer-dominant mergers and acquisitions

This article investigates consumer reactions to acquirer-dominant mergers and acquisitions (M&As) from the perspective of the (smaller) target brand and explores how marketing actions can mitigate negative effects. The findings from five studies show that consumers tend to react negatively to M&As by devaluing the acquirer brand, increasing their intention to switch, and adjusting their attitudes toward the target brand upward. We suggest that psychological reactance is a mediator of the negative effects of merger information on customers' attitudes and switching intentions. We also demonstrate that brand managers can attenuate reactance by involving consumers in merger decisions, thus providing important managerial implications for M&A decisions and processes.     

跨国并购浪潮中的风险防范

近日,新闻集团宣布以50亿美元的价格收购道琼斯公司,这一收购案如果最终成功,道琼斯公司拥有的《华尔街日报》、道琼斯通讯社等商业和财经领域的     

Overbidding in cross-border acquisitions: Misperceptions in assessing and valuing knowledge

Many firms competing across borders use acquisitions to gain the knowledge and capabilities that reside in target firms. Assessing and valuing knowledge in the international context is complex and frequently error-prone. The international acquisition literature has not adequately addressed the difficulties of valuing knowledge, the costs associated with acquiring knowledge, the factors behind escalating bids to acquire knowledge, and the impact of knowledge acquisitions on returns. We conceptually explore several key dimensions that influence the assessment and valuation of knowledge and develop propositions positing the effects of predictor variables and moderators on knowledge assessment and valuation in cross-border acquisitions.     

Domestic mergers and acquisitions in BRICS countries: Acquirers and targets

We study the firm value determinants for domestic acquisitions within BRICS countries considering both acquirer and target shareholders. Targets earn significant positive announcement returns of 1.45% on average. Acquirers lose slightly. We employ a comprehensive set of explanatory variables and test for cross-sectional return drivers. Target returns are negatively related to pre-announcement returns and firm size, while they are positively related to GDP growth. Our results are consistent with insider trading capturing some of the target excess returns, which are highest for small targets based in countries with high recent GPD growth.     

Language and cross-border acquisitions: An exploratory study

The aim of this study is to examine the effects of language on post-acquisition performance of US based cross-border acquisitions. In this study we attempt to show that post-acquisition performance is explained by the linguistic distance between the acquirer and target country of the acquisition. In addition, this study explains the moderating role of acquisition experience in the linguistic distance-acquisition performance relationship. An analysis of 1120 US acquisitions in 33 target countries over a period of 6 years (2007 to 2012) demonstrates that linguistic distance has explanatory value in post-acquisition performance. Our analysis also demonstrates that the acquirer’s cross-border acquisition experience plays a significant role as a moderator of this linguistic distance—acquisition performance relationship. In addition, our analysis of lingua franca proficiency also lends support to our hypothesized relationships and demonstrates the robustness of our findings.     

Trade liberalization and industrial restructuring through mergers and acquisitions

This paper analyzes mergers and acquisitions (M&As) as a channel of industrial restructuring after trade liberalization. Using the Canada–United States Free Trade Agreement (CUSFTA) of 1989 as a source of exogenous variation in trade barriers, I show that trade liberalization increased domestic Canadian M&A activity (Canadian firms buying other Canadian firms) by over 70%. There is no robust link between tariff reductions and either domestic U.S. or cross-border M&As. I also provide evidence that domestic M&As transferred resources from less to more productive firms and that the magnitude of the overall transfer was quantitatively important.     

Learning by doing: Cross-border mergers and acquisitions

We rely on organizational learning theory and strategic momentum research to examine the international merger and acquisition (M&A) activities of a sample of S&P 500 firms. We hypothesize that the learning associated with a firm's prior acquisition experience increases the likelihood the firm will engage in subsequent international acquisitions. Results from a sample including company-country level data indicate that both prior domestic acquisitions and international acquisitions influence the likelihood of acquisitions in foreign markets by U.S.-based firms. We also find that prior experience with international acquisitions is more predictive of subsequent international acquisitions than prior domestic acquisition experience. Moreover, we find that the acquisition experience within a host country had a stronger influence on subsequent acquisitions within that country than other prior non-host country international acquisition experiences.     

Trade liberalization and industrial restructuring through mergers and acquisitions

This paper analyzes mergers and acquisitions (M&As) as a channel of industrial restructuring after trade liberalization. Using the Canada-United States Free Trade Agreement (CUSFTA) of 1989 as a source of exogenous variation in trade barriers, I show that trade liberalization increased domestic Canadian M&A activity (Canadian firms buying other Canadian firms) by over 70%. There is no robust link between tariff reductions and either domestic U.S. or cross-border M&As. I also provide evidence that domestic M&As transferred resources from less to more productive firms and that the magnitude of the overall transfer was quantitatively important.