THE EFFECT OF ACQUISITION EXPERIENCE, INSTITUTIONAL CONTEXT AND NATIONAL CULTURE ON CROSS-BORDER MERGER ABANDONMENT AND COMPLETION.

Abstract

In this study, we offer a first attempt to explain two phenomena that, to the best of our knowledge, were ignored in the literature: (a) the likelihood that an announced M&A deal will be abandoned or completed; and (b) the duration between the announcement and completion of an M&A deal. In so doing, we shift the attention from post-M&A performance to the pre-M&A process. We believe the latter is interesting in its own right, as many announced M&A deals are never completed or take a long time to be finalized. We explored these issues by applying an extended transaction cost perspective, merging in insights from behavioral and institutional theories. That is, we construct experience (behavioral theory) and distance (institutional theory) variables that we argue to affect the level of an M&A deal's transaction costs. We test our hypotheses with of 3,851 international M&A events that were announced in the worldwide business service industry between 1981 and 2001. A complex set of results is produced, suggesting that indeed firm experience and country distance affect M&A completion and duration.