Strategic Asset-Seeking During in a Cross Border Acquisition Wave

Abstract

Cross border acquisition (CBA) waves are periods of concentrated acquisition activity characterized by a cyclical pattern. These waves are triggered by exogenous shocks and provide a time bound window for firms to respond either by seeking newer markets or by upgrading themselves by acquiring strategic assets. We draw on the extant literature that emphasizes the challenges faced by emerging markets firms in pursuing cross border acquisitions. Our findings suggest a U-shaped relationship between entry timing within a wave and strategic asset-seeking acquisitions, which is driven by a trade-off between acquisition of high quality assets and reduction in uncertainty surrounding the acquisition deal. Further, acquirer’s ownership structure conditions the relationship between entry timing and acquisition motives. Specifically, business group affiliation and foreign institutional ownership strengthen the relationship between timing within a CBA wave and strategic asset-seeking motive. Our findings, based on a sample of Indian acquirers provide robust support to our theoretical arguments.