Lessons from the flipside: How do acquirers learn from divestitures to complete acquisitions?

• Main Authors: Đoàn, Thu Trang, Sahib, PadmaRao, Witteloostuijn, Arjenvan
• Other Authors: Khoa Quốc tế, ĐHQGHN
• Format: Article
• Language: English
• Published: Elsevier 2019
• Subjects: Acquisitions; Divestitures; Organizational learning; Pre-integration process; Vicarious learning
• Online Access: http://repository.vnu.edu.vn/handle/VNU_123/64798
• Institution: Vietnam National University, Hanoi

We examine whether experience from prior divestitures is associated with higher completion likelihood in subsequent acquisitions. We argue that through divestitures, firms could extract meaningful knowledge that is helpful for completing their acquisitions, such as a general understanding of acquisition deal-making stages, and the stories and aims of the target in an M&A transaction. In addition, viewing divestitures as the flipside of acquisitions, we conjecture that the selling firm can observe how the divested component of their business is acquired, and vicariously learn from these observations. We also investigate the relative importance of learning from divestiture vis-à-vis acquisition experience in determining acquisition deal completion. Finally, we contend that the effect of learning from divestitures on acquisition deal completion depends on acquisition experience and deal value. We find evidence supporting our conjectures in a sample of 2164 M&A transactions from the worldwide computer and printing industries between 1991 and 2010.