Merger and acquisition purposes and external communication strategy

Abstract

We study under what conditions an acquirer actively conveys information about its deal via a conference call. Drawing upon literatures on communication and competition, we theorize about how the intent of an acquisition is associated with (a) whether a conference call is held and (b) how vague the communication is. If a firm seeks unique synergy through an acquisition, we predict that it will seek to preserve confidentiality and avoid informing rivals, and thus the acquirer will communicate less. Conversely, if a firm seeks to initiate greater industry concentration, it will communicate more extensively by holding a conference call and using more precise language to encourage rivals to follow suit. Empirically, we examine the conference call decisions and transcript contents for domestic acquisitions made by U.S. listed firms (2003-2018), finding support for most of the predictions. The paper thereby opens new research avenues on the strategic use of corporate communication.