Do I Really Need You? The Impact of External Advisors on M&A Dynamic Capabilities

Abstract

External M&A advisors significantly impact a firm’s M&A decisions. While research so far has mainly focused on analyzing the impact of external advisors on individual M&A projects, findings about their long-term influence are limited. Do advisors impact just the performance of M&A projects as one-time events or do they have a lasting impact on a firm’s M&A management capability in a dynamic M&A environment? Our research attempts to better understand the interplay of an internal M&A function and external M&A advisors with respect to their role as antecedents of M&A dynamic capability. Using survey data from 205 acquirers in the German- speaking countries, we provide evidence for the impact of both external and internal organizational mechanisms on M&A dynamic capability, but also empirically highlight the limitations of external resources. Our analysis hereby recognizes the moderating effect of an M&A function’s organizational positioning. Considering the hierarchical ordering of dynamic capabilities, we theorize and empirically demonstrate that M&A lower-order dynamic capability partially mediates the impact of M&A higher-order dynamic capability on M&A performance. This enables a more nuanced understanding of the relationship between M&A dynamic capabilities and M&A performance and its organizational antecedents.