When the target may know better: Effects of experience and information asymmetries on value from mergers and acquisitions

• Main Authors: CUYPERS, Ilya R. P., CUYPERS, Youtha, MARTIN, Xavier
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2017
• Subjects: acquisition target; bargaining; experience advantage; M&A performance; product-market scope; mergers and acquisitions; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5037; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6036/viewcontent/Cuypers_et_al_2017_Strategic_Management_Journal.pdf
• Institution: Singapore Management University

Extending research on the effect of experience on acquisition outcomes, we examine how the differential in previous M&A experience between the target and the acquirer affects the value they, respectively, obtain when the acquirer takes over the target. Drawing on literature about organizational learning, negotiation, and information economics, we theorize that the party with greater experience will be able to obtain more value. Furthermore, we theorize that the effect of differential M&A experience on value obtained is contingent on the level of information asymmetry the acquirer faces with respect to the target, specifically as a function of the target's product-market scope and whether the deal is friendly. We test and find support for these predictions in a sample of 1,241 M&As over a 30-year period.