Likelihood Of Acquisition Research Articles

Learning by doing: Cross-border mergers and acquisitions

We rely on organizational learning theory and strategic momentum research to examine the international merger and acquisition (M&A) activities of a sample of S&P 500 firms. We hypothesize that the learning associated with a firm's prior acquisition experience increases the likelihood the firm will engage in subsequent international acquisitions. Results from a sample including company–country level data indicate that both prior domestic acquisitions and international acquisitions influence the likelihood of acquisitions in foreign markets by U.S.-based firms. We also find that prior experience with international acquisitions is more predictive of subsequent international acquisitions than prior domestic acquisition experience. Moreover, we find that the acquisition experience within a host country had a stronger influence on subsequent acquisitions within that country than other prior non-host country international acquisition experiences.

The Characteristics of Bidding Firms and the Likelihood of Foreign Acquisitions

This paper investigates the firm characteristics of bidding firms in cross-border acquisitions. We find that the likelihood of cross-border acquisitions increases with the size of bidding firms and with the performance of bidding firms. These results indicate that large and high performing bidding firms choose foreign targets firms over domestic target firms. Further, foreign acquisitions generate significant positive abnormal returns to bidding firms. In addition, the cumulative average abnormal returns to bidding firms over the event window around the announcement day [-1, 0, 1] is significant higher for foreign acquisitions in comparison with domestic acquisitions. Finally, we find that the likelihood of cross-border acquisitions decreases with the leverage of bidding firms, which indicate that only bidding firms with a solid financial position are engaged in foreign acquisitions.

Dividend Signaling: Evidence from Bank IPOs

Post-IPO banks are far more likely to initiate dividends than nonfinancial firms. Moreover, dividend initiation has a major impact on the ultimate disposition of a newly public bank, increasing its likelihood of subsequent acquisition by around 40 percent and reducing the expected time until acquisition by 92 percent. Further, conditional on being acquired, dividend initiation significantly increases the takeover premium. Average premiums for post-IPO dividend initiators exceed those on non-dividend payers by about 50 percent of the market value of the bank in the month prior to the takeover announcement. Positive associations between bank performance and dividend initiation and between dividend initiation and both takeover likelihood and premium appear consistent with a signaling role for dividends. Dividend initiation seems to speed up and amplify the rewards to owners that may be reaped through an ultimate sale of the institution.

Takeovers, market monitoring, and international corporate governance

We theoretically and empirically examine the role of international takeover markets in curtailing dominant shareholder moral hazard for firms with higher value‐added from acquisitions. In equilibrium, such firms strategically list shares in the markets of their targets and voluntarily dilute dominant shareholder control through capital‐raising events to lower their expected acquisition costs. Empirical tests, using a sample of foreign firms cross‐listing on U.S. stock exchanges during 1990–2003, support the framework. We find a strong influence of post‐listing dilution of dominant shareholder control through capital‐raising events on the likelihood of acquisitions and their cost to the acquirers, in both U.S. and non‐U.S. markets.

Regulations, Supervision Approaches and Acquisition Likelihood in the Asian Banking Industry

We investigate the association between the regulatory and supervision framework and the likelihood of being involved in acquisitions either as acquirer or target in the Asian banking industry over the period 1998–2004. The sample consists of 473 commercial banks operating in 9 markets, a total of 2,693 yearly observations. We use information from the new database of the World Bank and examine various regulations such as the level of accounting and information disclosure requirements, the restrictions on bank activities, the degree of official disciplinary power, and capital adequacy requirements. Our results suggest that the latter two influenced the probability of becoming a target or acquirer; however, restriction on activities and disclosure requirements had no impact on the acquisition likelihood.

Factors affecting the reproductive success of dominant male meerkats

Identifying traits that affect the reproductive success of individuals is fundamental for our understanding of evolutionary processes. In cooperative breeders, a dominant male typically restricts mating access to the dominant female for extended periods, resulting in pronounced variation in reproductive success among males. This may result in strong selection for traits that increase the likelihood of dominance acquisition, dominance retention and reproductive rates while dominant. However, despite considerable research on reproductive skew, few studies have explored the factors that influence these three processes among males in cooperative species. Here we use genetic, behavioural and demographic data to investigate the factors affecting reproductive success in dominant male meerkats (Suricata suricatta). Our data show that dominant males sire the majority of all offspring surviving to 1 year. A male's likelihood of becoming dominant is strongly influenced by age, but not by weight. Tenure length and reproductive rate, both important components of dominant male reproductive success, are largely affected by group size and composition, rather than individual traits. Dominant males in large groups have longer tenures, but after this effect is controlled, male tenure length also correlates negatively to the number of adult females in the group. Male reproductive rate also declines as the number of intra- and extra-group competitors increases. As the time spent in the dominant position and reproductive rate while dominant explain > 80% of the total variance in reproductive success, group composition thus has major implications for male reproductive success.

The accentuated CEO career horizon problem: evidence from international acquisitions

AbstractWe develop a conceptual model of the career horizon problem of CEOs approaching retirement and discuss its implications on firm risk taking, specifically in engagement in international acquisitions. Based on prospect theory and agency theory, we emphasize the legacy conservation and wealth preservation concerns of CEOs and investigate how their holdings of in‐the‐money unexercised options and firm equity accentuate or mitigate the career horizon problem. The model is tested in the context of international acquisitions with a sample of 293 U.S. firms over a five‐year period (1995–1999). We find that a longer CEO career horizon is associated with a higher likelihood of international acquisitions. We also find that CEOs nearing retirement with high levels of in‐the‐money unexercised options and equity holdings are less likely to engage in international acquisitions than CEOs with low levels of in‐the‐money options and equity holdings. The study raises important considerations about the implications of CEOs' equity and in‐the‐money option holdings on firm risk taking at various stages of their career horizon. Copyright © 2008 John Wiley & Sons, Ltd.

Socially acquired predator avoidance: Is it just classical conditioning?

Associative learning theories presume the existence of a general purpose learning process, the structure of which does not mirror the demands of any particular learning problem. In contrast, learning scientists working within an Evolutionary Biology tradition believe that learning processes have been shaped by ecological demands. One potential means of exploring how ecology may have modified properties of acquisition is to use associative learning theory as a framework within which to analyse a particular learning phenomenon. Recent work has used this approach to examine whether socially transmitted predator avoidance can be conceptualised as a classical conditioning process in which a novel predator stimulus acts as a conditioned stimulus (CS) and acquires control over an avoidance response after it has become associated with alarm signals of social companions, the unconditioned stimulus (US). I review here a series of studies examining the effect of CS/US presentation timing on the likelihood of acquisition. Results suggest that socially acquired predator avoidance may be less sensitive to forward relationships than traditional classical conditioning paradigms. I make the case that socially acquired predator avoidance is an exciting novel one-trial learning paradigm that could be studied along side fear conditioning. Comparisons between social and non-social learning of danger at both the behavioural and neural level may yield a better understanding of how ecology might shape properties and mechanisms of learning.

Consolidation in the Greek banking industry: which banks are acquired?

PurposeThe present paper aims to examine the relationship between bank's characteristics and market characteristics and the probability of acquisition in the Greek banking industry.Design/methodology/approachLogistic regression is used to examine a sample of 24 banks, 9 of which were acquired between 1998 and 2002.FindingsIt is found that profit and cost efficiency, liquidity and capital strength do not seem to have an impact on the acquisition likelihood. Market share in terms of deposits, the number of branches, the annual growth of bank's total assets and the size of banks are negatively related to the acquisition likelihood. From the three market characteristics that were examined, the concentration of the five largest banks, the mean return on average assets of the industry and the average total assets growth, only the first one was found to have a negative and statistically significant impact on the acquisition likelihood.Research limitations/implicationsVariables related to management incentives and corporate governance, which may have an impact on the acquisition likelihood, were not available and therefore have not been considered. It is hoped that future research will improve upon this.Practical implicationsThe results could be of interest to bank managers of potential targets that would like to know whether their bank is developing a profile similar to the typical target. Furthermore, knowledge of bank's and market characteristics that increase the probability of acquisition can be of particular interest to policy makers.Originality/valueThe investigation of the characteristics that affect the likelihood that a bank will be acquired has been largely ignored with most studies in banks M&As using event study, operating performance or X‐efficiency methodology to examine the effect of M&As on the stock prices or the performance of banks. Furthermore, the limited studies that have examined the characteristics of acquired banks have focused on the US market. The present paper adds to the literature by examining the Greek banking sector, which is different from the US one in many aspects.

Sourcing technological knowledge through corporate acquisition: Evidence from an international sample of high technology firms

We investigate the prevalence of the motive to source technological knowledge externally through corporate acquisition. Drawing on make-or-buy and organizational learning theories, we infer the implications of this explanation for the acquirers' pre-acquisition innovative characteristics. Using an international sample of 6106 high technology acquisitions during 1984–2000, we assess the contribution of innovative characteristics to the acquisition likelihood. For firms acquiring small private firms and former subsidiaries—but not public targets—the evidence is consistent with three propositions: (1) A firm's commitment to internal R&D is negatively affected by the decision to acquire; (2) Low R&D productivity increases the likelihood of acquisition; (3) A large knowledge stock predisposes firms to acquire because they perceive they are capable of selecting and absorbing targets. We conclude that acquisitions of small private firms and former subsidiaries are a viable R&D strategy to explore a range of potential future innovation trajectories for large public firms.

Sourcing Technological Knowledge Through Corporate Acquisition: Evidence from an International Sample of High Technology Firms

We investigate the prevalence of the motive to source technological knowledge externally through corporate acquisition. Drawing on make-or-buy and organizational learning theories, we infer the implications of this explanation for the acquirers’ pre-acquisition innovative characteristics. Using an international sample of 6106 high technology acquisitions during 1984-2000, we assess the contribution of innovative characteristics to the acquisition likelihood. For firms acquiring small private firms and former subsidiaries – but not public targets – the evidence is consistent with three propositions: (1) A firm’s commitment to internal RD (2) Low RD (3) A large knowledge stock predisposes firms to acquire because they perceive they are capable of selecting and absorbing targets. We conclude that acquisitions of small private firms and former subsidiaries are a viable R&D strategy to explore a range of potential future innovation trajectories for large public firms.

Importance of the environment for patient acquisition of methicillin-resistant Staphylococcus aureus in the intensive care unit: A baseline study

To assess the degree of environmental contamination with methicillin-resistant Staphylococcus aureus (MRSA) in critical care and the likelihood of subsequent new patient acquisition if carriers were or were not moved to single rooms. Randomized sequential sampling of bed areas. Intensive care units of two teaching hospitals. Medical and surgical patients requiring critical care. Six environmental sites around randomly selected patients plus two communal sites were sampled using contact plates during periods when patients with MRSA were physically isolated or not. Admission, weekly, and discharge screening patient swabs were taken to identify patients admitted with, or newly acquiring, MRSA. A total of 2,436 samples were taken from environments around 114 patients, plus a further 349 samples from doctors' hands and telephones. Of the 47 bed areas where MRSA strains were identified that were not found initially on patients, only one patient subsequently acquired the same strain. Five other patients became colonized with new MRSA strains, but these were not found in their environment beforehand. Of 52 patients colonized with MRSA, 34 had a similar strain found subsequently in their environment. Whereas the MRSA-colonized patient frequently contaminates his or her local environment, transmission of MRSA from the environment to the patient was not commonly identified. Studies elucidating possible routes of MRSA transmission are urgently needed to inform infection control policies.

Preventing Herpes Simplex Virus Type 2 May Reduce HIV Risk Among Some Men Who Have Sex with Men

In a randomized, controlled study of an HIV prevention intervention conducted among high-risk men who have sex with men, HIV infection rates were elevated among those who acquired herpes simplex virus type 2 (HSV-2) during follow-up, particularly within six months of the herpes diagnosis.1 The risk of herpes, in turn, was elevated among black men and among men who engaged in certain risky behaviors; it was not reduced among those who participated in the intervention. The study, which was carried out in six U.S. cities from 1999 to 2003, recruited HIV-negative men who were at least 16 years old, had had anal sex with a man in the year before enrollment and were not in a mutually monogamous relationship of two or more years’ duration with an HIV-negative partner. Participants who were assigned to the intervention received individualized counseling in 10 hour-long sessions over 4–6 months, followed by quarterly maintenance sessions; those assigned to the control group received standardized pretest and posttest counseling and semiannual HIV tests. At six-month intervals, participants completed audio computer-assisted self-interviews about their sexual risk behavior since the previous interview, and provided blood samples for HIV and herpes testing. HSV-2 infections acquired during follow-up were categorized as recent incident at the visit at which they were detected, remote incident at visits within the next 24 months and prevalent at all subsequent visits. The analyses were based on the 3,909 participants for whom valid HSV-2 tests were available (91% of the cohort). These men were about evenly divided between the intervention and control groups; in both, the median follow-up time was 36 months. Twenty percent of men in the analytic sample had HSV-2 infection when they entered the study, 75% were seronegative throughout the study and 4% acquired the virus during follow-up; the incidence of HSV-2 did not differ between the intervention and control groups. After conducting univariate regression analyses to identify potential predictors of herpes infection, the researchers performed multivariate hazard analyses to assess independent associations. These calculations confirmed that the likelihood of acquiring HSV-2 was similar for those assigned to the intervention and controls. Black men were significantly more likely than whites to become infected during follow-up (hazard ratio, 1.9), and those who reported having had unprotected receptive anal intercourse five or more times since the previous interview were more likely to do so than were those who said they had not engaged in this behavior (2.6). The likelihood of HSV-2 acquisition also was raised among men who, in the last six months, had had an HIV-positive male partner (1.6) or had had six or more partners (1.5). Overall, the rate of HIV acquisition during follow-up was 1.9 per 100 person-years. Rates were significantly higher, however, among participants with herpes infection—6.9 per 100 person-years among those with recent incident infection, 6.8 per 100 among those with remote incident HSV-2 and 2.7 per 100 among those with prevalent infection. In analyses controlling for study arm, study site, age, race and a variety of risky behaviors, men with recent incident HSV-2 infection and those with prevalent infection were significantly more likely than those who remained free of HSV-2 to acquire HIV (hazard ratios, 3.6 and 1.5, respectively). Remote incident herpes infection was associated with an increase in the likelihood of HIV acquisition in the univariate analysis, but not in the multivariate analysis. Twenty participants acquired both HSV-2 and HIV during follow-up; seven had the HSV-2 diagnosed before the HIV, and 13 had both infections detected at the same visit. No herpes infections were detected after an HIV diagnosis, because participation in the study ended if a man tested positive for HIV. The researchers note that distinguishing between a causal association and simultaneous acquisition of the two infections “is very difficult and would require very frequent HSV-2 and HIV testing.” Given that the behavioral intervention was not associated with a reduced risk of HSV-2 acquisition, the researchers stress the need for studies to evaluate other prevention approaches, including education, counseling and potential vaccines. Furthermore, they conclude that HSV-2 infection is an important risk factor for HIV acquisition in this population and therefore “appears to be an important target for HIV prevention interventions.”

Polymorphism in the CCR5 Gene Promoter and HIV-1 Infection in North Indians

The clinical course and outcome of human immunodeficiency virus–1 (HIV-1) infection are highly variable among individuals. CCR5 is the primary coreceptor that mediates entry of HIV-1 (R5) into permissive host cells. In this study, five SNPs (59029G/A, 59353T/C, 59356C/T, 59402A/G, and 59653C/T) in the promoter region and a deletion of 32 bp (Δ32) in the CCR5 gene were evaluated in 180 chronically HIV-1–infected North Indians. The study showed the following: (1) the protective CCR5 Δ32 allele was absent; (2) the frequency of CCR5*59402A allele in the HIV-infected people (66.4%) was higher than in healthy subjects (57.1%, p = 0.027) and in the CDC stage C patients (76%) versus stages A and B patients together (60%; p = 0.002); (3) homozygous CCR5*59402 AA genotype was significantly increased in the seropositive subjects (46.1%) compared with healthy control subjects (30.2%; p = 0.008) and in the CDC stage C patients (59.2%) compared with stage A and B subjects (37.6%, p = 0.007); and (4) an increased frequency of homozygous ACCAC haplotype was present in the seropositive stage C patients (32.4%) versus 15.6% in patients in stages A plus B ( p = 0.013). These observations suggest an association of CCR5*59402A with increased likelihood of acquisition of HIV-1 and development of AIDS in the Asian Indian population. Further studies are required to confirm these findings and understand the effect of CCR5 polymorphisms on the outcome of HIV-1 infection.

Regulations, Supervision Approaches and Acquisition Likelihood in the Asian Banking Industry

We investigate the association between the regulatory and supervision framework and the likelihood of being involved in acquisitions either as acquirer or target in the Asian banking industry over the period 1998-2004. The sample consists of 473 commercial banks operating in 9 markets, a total of 2,693 yearly observations. We use information from the new database of the World Bank and examine various regulations such as the level of accounting and information disclosure requirements, the restrictions on bank activities, the degree of official disciplinary power, and capital adequacy requirements. Our results suggest that the latter two influenced the probability of becoming a target or acquirer; however, restriction on activities and disclosure requirements had no impact on the acquisition likelihood.

Effects of Firm R&D Investment and Environment on Acquisition Likelihood*

abstract R&D investments contribute to the development of firm technology resources, and the possession of such resources often increases a firm's attractiveness as a potential acquisition target. However, the value ascribed to a firm's technology resources by would‐be acquirers may be moderated by its industry's environmental characteristics. Using data from 2886 firms, we find that investments in R&D predict acquisition likelihood and that R&D investments are most strongly associated with acquisition of firms under conditions of high environmental munificence and dynamism. Theoretical and managerial implications are discussed.

Temporal evolution of the prevalence of methicillin-resistant Staphylococcus aureus in a tertiary hospital in Bahia, Brazil: a nine-year evaluation study

Infections caused by methicillin-resistant Staphylococcus aureus (MRSA) have become an increasing problem in Brazilian hospitals within the last years. In Bahia, there is scarce information on the epidemiological characteristics of MRSA infections and their determinants. The objective of this study was to evaluate the temporal evolution of MRSA infections in a private, tertiary hospital, in Salvador, the capital of the state of Bahia. We reviewed the microbiological records of bacterial isolates from the Hospital Espanhol, a 300 bed, general hospital, in Salvador. We analyzed the frequency of positive cultures for S. aureus during the last nine years, the prevalence of MRSA, and the spatial distribution of the isolates in the hospital. We also evaluated the temporal evolution of MRSA during the study period. Seven-hundred-ten cultures were positive for S. aureus from 1996 through 2004. The prevalence of MRSA was 28%. The intensive care unit (59%), the hemodyalisis unit (43%), and the infectious diseases unit (34%) presented with significantly higher prevalence of MRSA, when compared to the remaining clinics of the hospital. We detected a significant increase of MRSA isolation among patients with nosocomial infections, over time (P<0.0001). MRSA isolates were highly resistant to alternative drugs (clyndamicin, erythromycin, co-trimexazole, levofloxacin), reinforcing the likelihood of nosocomial acquisition of the pathogen. The overall prevalence of MRSA in the hospital has remained relatively stable within the last nine years, but there was a significant trend forincreasing nosocomial acquisition of MRSA over time, which is even higher for patients attended in intensive care units, HDU, or IDU.

Who buys whom: information environments and organizational boundary spanning through acquisitions

Companies extend their boundaries through acquisitions to new industries, product lines, technologies, markets and geographic locations. Diversification research has focused predominantly on boundary extensions across industries. Using data on 167 intra-industry acquisitions in the pharmaceuticals industry between 1991 and 1996, we study boundary extension in an industry, integrating existing arguments to examine how proximity in intraindustry networks, geographic location, and technological domain influences the likelihood of acquisition. As expected, the proximity of two firms in these search contexts increases the likelihood that one will acquire the other, but the contexts are partial substitutes, proximity in one search context overcoming distance in other contexts.Thus, we find that while pharmaceutical companies are more likely to acquire technologically similar foreign companies, they are more likely to acquire technologically dissimilar alliance partners. Our results contribute to an improved understanding of who buys whom and in doing so, organizational boundary spanning through acquisitions.

The Influence of Acquisition Experience and Performance on Acquisition Behavior: Evidence From the U.S. Commercial Banking Industry

We draw upon theories of organizational learning to examine acquisition likelihood in a sample of banking industry acquisitions from 1988 through 2001. Although research on organizational learning suggests that routines arising both from experience and from performance feedback guide organizational learning, the combined effect of these two sources of learning has rarely been examined. Findings are consistent with our theoretical predictions: (1) prior acquisition experience, (2) recent acquisition performance, and (3) the interaction between acquisition experience and recent acquisition performance are all positively related to the likelihood of subsequent acquisition.

Intra-industry effects of completed and cancelled cross border acquisitions in Australia: A test of the acquisition probability hypothesis

Globalization has led to an increase in cross-border mergers and acquisitions in recent years. Australian firms have featured prominently as acquisition targets in the latest merger wave. Cross-border acquisitions significantly affect industry dynamics and competitive balance. We investigate the intra-industry effects of cross-border acquisition of Australian firms and find, among others, that the target firms' rivals realized significantly positive abnormal returns following both the acquisition proposal and termination announcements. We relate our results to competing hypotheses and find evidence consistent with the acquisition probability hypothesis. Interestingly, we find that the abnormal returns earned by the rival firms at the time of the termination of the acquisition involving their industry counterparts were greater than the returns earned at the time of the acquisition proposal announcement. These results are consistent with the assertion that the likelihood of acquisition of the rival firms increases following the termination of the initial acquisition proposal involving their industry counterparts.