Abstract
Given the frequent failure of many M&A deals, the question of their sustainability is a critical one. Still, in existing literature, there is a visible emphasis on the perspective of the acquiring firm and its characteristics in affecting M&A performance. Moreover, the role of trust, both from the acquiring and acquired firms, has not received extensive attention to date. The present paper builds on a quantitative and qualitative study of Israeli high-tech start-ups acquired by international firms to explore the effects of trust on M&A success. Our study indicates that trust from acquired firm managers positively affects acquisition success, although trust from the acquiring firm (expressed with the autonomy that it leaves to the acquired firm) is not a significant predictor of acquisition success.
Highlights
Mergers and acquisitions (M&A) belong to the focal strategies for organizations to ensure a sustainable competitive position
We study the relevance of trust within the context of start-ups, because most acquired companies, nowadays, are small and medium enterprises (SMEs), with a preference for creative and entrepreneurial start-ups
The findings suggest that only trust in the acquired firm has a significant effect on the performance measures, both for ‘perceived performance’ and ‘satisfaction with acquisition’
Summary
Mergers and acquisitions (M&A) belong to the focal strategies for organizations to ensure a sustainable competitive position. (These phenomena include mergers, acquisitions, divestitures, spin-offs, debt-for-equity swaps, joint ventures, private placements of common equity and convertible securities, and the cash injection component of recapitalization according to Bloomberg standards). These transactions involving two organizations are oftentimes used to achieve economies of scale, diversification, and economic growth. Not surprisingly, for the past decades, a number of researchers have dealt with different factors affecting the sustainability of M&A In spite of this plethora of research, the critical success factors behind M&A and the reasons for their frequent failure still remain rather poorly understood. King et al [6] concluded that despite a long tradition of research, none of the variables most frequently featured in extant research (including the level of diversification and relatedness, payment method, or earlier acquisition experience) turned out to be significant predictors of variance in post-acquisition performance
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