Macroeconomic influences on M&A deal outcomes: An analysis of domestic and cross-border M&As in developed and emerging economies

Abstract

The abandonment of announced merger and acquisition (M&A) deals during negotiations has recently gained prominence in academia and practice. However, the effect of macroeconomic variations on announced deal outcome is uncertain. This study attempts to determine the impact of interest rate, inflation, real exchange rate, and gross domestic product on the abandonment of domestic and cross-border M&As through autoregressive distributed lag regression on BRICS and G7 countries. Domestic M&As from BRICS are very volatile, whereas outbound M&As from G7 are mostly stable to changing home country macroeconomy. The findings reveal divergences in firms’ financial abilities and strategic mindsets in developed (G7) and emerging (BRICS) countries. Macroeconomic changes have a varying impact on deal abandonments. The results provide a better understanding of higher abandonments in emerging economies. This study will help firms create differentiated strategies for M&A negotiation under changing macroeconomic scenarios and policymakers frame policies influencing M&A outcomes.