International Acquisitions Research Articles

Going global? CEO political ideology and the choice between international alliances and international acquisitions

Going global? CEO political ideology and the choice between international alliances and international acquisitions

Measuring Collaborative Synergies with Advanced Real Options: MNEs’ Sequential Acquisitions of International Ventures

This paper aims to extend the real options theory valuing strategic collaborative synergies by advanced real options with changing volatility and contributes to the international business literature on MNEs’ sequential acquisitions of international ventures. The proposition is that collaborative synergies can be valued with advanced real options with changing volatility when an MNE is pursuing the sequential acquisition of an international venture and the MNE’s stock volatility is changing at the time of deciding on a full takeover. The paper discusses how recombining and non-recombining lattices with constant and changing volatilities can be employed to value the collaborative synergies of sequential international acquisitions. The theoretical proposition has been justified with the explanatory case study: Natura Cosméticos S.A.’s (Brazil) sequential acquisition of the Aesop brand (Australia). In conclusion, the paper discusses its findings, contributions, limitations, and future work.

Business group and cross-border acquisitions: evidence from multilatinas

Objective: This study seeks to examine how multilatinas affiliated with a business group influence the degree of ownership acquired in their cross-border acquisitions in the region. Method: We considered a sample of 342 cross-border acquisitions conducted by the 58 multilatinas from Argentina, Brazil, Chile, Colombia, and Mexico during the period that extends from 2008 to 2018. To test our hypotheses, we selected the Generalized Estimating Equations (GEE), a variant estimator of GLM Generalized Linear Models (GLS). Main Results: Drawing on agency and internationalization theories, we provide evidence that the property of multilatinas in a cross-border acquisition is determined by the factors of the company–business group affiliation, international diversification and state-shareholding structure. In general, the degree of ownership in cross-border acquisitions will be determined by the degree of diversification. In addition, we conclude that multilatinas with strong state-owned capital are likely to acquire a lower degree of ownership of cross-border acquisitions within the region. Relevance / Originality: This study contributes to theory development by providing more information about multilatinas and by integrating the agency theory theoretical underpinnings in explaining the degree of ownership. Specifically, this research provided new insight to clarify our understanding of multilatinas and their affiliation with business groups as determining factors in acquired ownership in cross-border acquisitions. Theoretical / Methodological Contributions: This research empirically demonstrates the importance of the degree of ownership in the process of acquisition of foreign companies by multilatinas. This study considered several common characteristics of multilatinas in the process of international acquisition, such as business group, diversification and state ownership participation.

Post-Acquisition Management in Transitional Economies: Empirical Analysis of Acquired Company in Telecommunication Industry

Abstract Growing globalization has created a business environment that encourages companies to internationalize through international acquisitions. The growth in the number and value of international acquisitions in the previous period has increased the number of studies that analyze this phenomenon from different standpoints. Research has shown that the success rate of international acquisitions is relatively low. Poor management of post-acquisition changes, which is particularly complex in transition economies, is cited as the main obstacle in creating value after acquisitions. The aim of the paper is to investigate the factors that contribute to the successful management of post-acquisition changes. The research is based on the case study of the acquisition of Montenegro Telekom by Deutsche Telekom. Data is obtained through employee surveys and interviews with expatriates engaged in acquisitions in transition economies. The research shows that successful management of post-acquisition changes requires change of the corporate culture in the short term and active knowledge transfer support from the parent to the target. Changes in corporate culture aim to encourage innovation among employees and willingness to accept a new business model and process. At the same time, knowledge transfer occurs through intensive employee training on the domestic market, abroad and through online courses and hiring expatriate managers. It turns out that these two processes are complementary and must be implemented simultaneously.

International acquisition processes: A cultural analysis of GE Appliances’ business transformation

International acquisitions of large, well-established western organizations by Chinese companies are now common. The cultural differences between the actors are often critical amid these processes. However, they can also be an opportunity for transformation and renewal for the acquired businesses. Regarding the dimension of organizational culture, this article analyzes the transformation of a 100-year-old American firm, General Electric Appliances (GEA), after its acquisition by the Chinese multinational company Haier. As a result, the company went from a nonrevenue growth business to a double-digit growth company in only 5 years. To study this transformation, we apply a cultural analysis framework based on Edgar and Peter Schein’s work. This article contributes to the debate on corporate cultural analysis in the context of international acquisitions by providing managers and scholars with a detailed account of GEA’s transformation.

A digitalized global economy: Studying the effect of digital readiness of countries on international merger and acquisition flows

ABSTRACT In the dynamic economic paradigm of the 21st century, the increasing importance of digitalization of economies motivates research on the role it plays for international capital flows. While the literature suggests that digitalization is revolutionizing different industries and sectors, few studies explore how the level of digital readiness of countries is impacting their abilities in attracting international investments. Drawing on insights from the resource-based view perspective this paper examines whether a country’s digital readiness helps it attract capital flows through increased international mergers and acquisitions (IMA). We argue that a higher level of digital readiness of a host country is associated with more IMAs targeting that country, especially for IMA deals in technology-intensive industries. We find evidence consistent with our model using a sample of 5347 IMAs by publicly traded US firms during the period 2010–2016. Overall, this study contributes to a better understanding of the mechanisms through which digitalization of economies impacts the global strategies of firms. The findings of this study provide evidence to policy makers about the impact of digital readiness on economy and this study is the first to examine the role of digital readiness in attracting IMAs.

Natura Vai às Compras: O Caso de uma Multinacional de Mercado Emergente

ABSTRACT This teaching case explores a unique international trajectory of an emerging market multinational in the cosmetics, fragrances, and toiletries industry. Natura &Co presents two very different internationalization strategies in two distinct moments: the first decisions seem to follow the gradual and incremental model described as the Uppsala model; later on, the company moves toward a more daring approach, explained by the springboard perspective, as it enters a series of large international acquisitions. The case is originally designed for disciplines of international business and international strategy at the graduate level and explores the above-mentioned theories, internationalization motives, and entry modes.

International acquisitions and efficiency and productivity of the Serbian cement industry

PurposeThis paper explores the impact of international acquisitions on the efficiency and productivity of the cement industry in an emerging economy.Design/methodology/approachThe data envelopment analysis (DEA) and Malmquist index (MI) are used to calculate the partial efficiency and productivity of individual inputs (materials, labour and fixed assets), as well as the total factor efficiency and productivity during the period 2000–2018. DEA and MI are combined with bootstrapping to perform succinct statistical inferences for determining the accuracy of results. In this paper we apply the input-oriented CCR DEA Window model. With respect to the level of analysis, data was collected from individual companies and then aggregated data at the industry level.FindingsThe research results show that international acquisitions positively affect efficiency of the cement industry in the long term. Efficiency of capital is lower in the short period after acquisitions. Additionally, international acquisitions positively affect partial productivity, as well as total factor productivity of the cement industry.Practical implicationsThe results of the study may be significant for managers and policy makers to design appropriate strategies for the improvement of the cement industry performance over time.Originality/valueResearch in emerging economies related to subject matter is limited, and this is one of the earliest research studies which explore change in efficiency and productivity at the level of Serbian cement industry.

Determinants of stock market reaction to cross-border acquisitions: evidence from emerging economies

PurposeThe global economy has witnessed an exponential increase in cross-border acquisitions (CBAs) by emerging market companies (EMCs), demanding a relook at their internationalization strategy. The purpose of the study is to investigate whether the announcement of CBAs by EMCs creates value for the equity-holders of acquiring firms and identify factors affecting the valuation of acquiring companies.Design/methodology/approachThe paper investigates the announcement impact of CBAs of CNX Nifty 500 Indian and SSE 380 Chinese companies. The event study analysis of 553 Indian and 125 Chinese acquisitions supports the contention that CBAs are indeed a strategic choice of EMCs for value creation.FindingsCBAs generate positive and statistically significant abnormal returns for shareholders of both Indian and Chinese acquirers. The markets, however, differ in terms of their motivations; country-level factors have been observed to exert significant influence on the returns of Indian acquirers. Indian companies experience larger value creation on acquiring firms established in developed, institutionally closer and/or economically distant markets. The findings support the asset-seeking motive of Indian companies.Originality/valueThe research work contributes to the evolving stream of CBAs literature with a focus on the globalization strategies of EMCs. The present study is a modest attempt to lay the foundation for a new theoretical framework (asset-seeking perspective) of overseas acquisitions from emerging economies. The existing studies on emerging economies have emphasized, in isolation, either Indian CBAs or international acquisitions by Chinese firms. Being so, the study is unique and original in the sense that it is a comparative study of India and China.

Country uncertainty, power distance, and payment methods in acquisitions

ABSTRACT This study examines the impact of country-specific uncertainty on the choice of payment method in international acquisitions. Our results show a negative association between the level of target country-specific uncertainty and cash transactions. Specifically, when the host country experiences a high level of country uncertainty, acquirers are more likely to choose non-cash transactions in which acquiring firms can issue their own equity to the target firm as part or all of the purchase consideration of the deal. The result is robust to alternative tests and analysis of subsamples. We also find that differences in uncertainty between host and home countries are informative of bidders’ payment choices. Further, we find that the negative relation between target country-specific uncertainty and cash payment weakens when there are larger differences in power distance between host and home countries. Our findings provide recommendations for policy-making bodies, and have implications for firm managers making corporate restructuring decisions.

The Role of Environmental Considerations in International Acquisition Performance

Recent research suggests that the environmental and social performance of a target firm positively influences its acquirer economic gains, as reflected in market reactions to acquisition announcements. However, previous studies indicate that firm investments aiming to mitigate negative environmental impacts may be perceived as misallocation of resources. This leaves unclear whether and when the acquisition of a target with a low environmental footprint will generate value gains for the acquirer. We shed light on this puzzle by identifying international acquisition deals characterized by certain configurations of factors that together bring about economic gains for the acquirer. We propose that such gains depend on the fit between the host country environmental regulations, the type of target acquired (clean vs dirty), and the bundle of capabilities of the acquirer. We study international acquisitions by French multinationals over 2007-2017. The results of our fuzzy set qualitative comparative analysis suggest that significant gains accrue to firms that invest in deals that favor the compliance with a strict regulatory context, either through the acquisition of clean targets or through the potential transfer of technical capabilities, in particular when the acquirer also has high social capabilities. By contrast, acquisitions consistent with regulatory arbitrage strategies are not likely to generate high returns. Our paper offers novel insights for research on firms’ responses to environmental regulations, on the financial performance implications of environmental investments and international acquisitions, and on non-market strategy.

For love or money? Family versus financial blockholders in international acquisitions

AbstractResearch Question/IssueWe study the relationship between family blockholding of voting rights and the relative size of international acquisitions, and the moderating effect of two types of financial blockholders (pressure‐resistant and pressure‐sensitive blockholders).Research Findings/InsightsEmploying an international sample of 8,687 non‐financial cross‐border acquisitions conducted by 4,630 acquirer firms from 40 home markets to 66 host countries between 2004 and 2013, we find a U‐shaped relationship between family blockholding of voting rights and the relative size of international acquisitions. Further, we find evidence that this relationship is moderated by the presence and type of financial blockholders. While pressure‐resistant financial blockholders shift this relationship downwards (due to intensified conflicts), pressure‐sensitive financial blockholders shift it upwards.Theoretical/Academic ImplicationsWe contribute to the literature on family firm governance and internationalization on several fronts. First, we revisit the predominant logic of linear effects of the family blockholding. We suggest the family blockholding's effects are related to nonlinear risk preferences of family owners, expressed through socioemotional wealth (SEW) slack. Second, we suggest that the “dominant shareholder interest” assumption of family firms, usually based on the controlling family's SEW should be interpreted contingent upon the interests of other financial shareholders. Finally, using family‐financial blockholder conflicts as the scenario, we suggest that principal‐principal conflicts depend on the composition of the conflicting blockholders, specifically, upon the nature of their relations with the firm.Practitioner/Policy ImplicationsThis study offers insights to policymakers and those interested in incentivizing family ownership that family owners' risk behaviors should be understood and discussed in the context of different financial blockholders as a reference group.

Multicultural leaders from emerging markets: transforming international acquisitions and corporate social responsibility

PurposeThe purpose of this paper is to explore the influence and advantages of leadership multiculturalism on global strategy development through cross-border mergers and acquisitions (CBA) and corporate social responsibility (CSR) from emerging market multinational companies (EMNCs) expanding into emerged markets. The key contribution of asymmetric multiculturalism is a novel finding based on inductive research. We fill a gap by further linking business leader characteristics and corporate strategic actions and examining how multicultural business leaders from emerging markets can be highly effective at CBA and CSR.Design/methodology/approachThe paper draws on in-depth interviews, observations and documentary evidence analyzed with iterative coding, construct definition and thematic development to understand how leadership multiculturalism affects CBA and CSR in an EMNC over time.FindingsThe new construct of leadership asymmetric multiculturalism describes strategic advantages accruing to leaders from developing markets who are culturally fluent in both emerging and emerged market milieus. The construct contributes to emergent research on the rise of multicultural leaders and their strategic advantages and delineates a pathway toward identifying advantages of emerging over emerged market business leaders.Research limitations/implicationsThe research addresses specific CBA and CSR strategies within one emerging market region and EMNC. Future research should further articulate and validate the key construct of asymmetric multiculturalism, further examine its sources, draw more explicit comparisons with data from emerged market leaders, and explore the applicability of these findings to strategic actions and advantages in both emerging and emerged markets.Practical implicationsEmerging market corporate leaders should identify and develop pertinent aspects of their own asymmetric multiculturalism in enacting CBA and CSR strategy with respect to EMNCs and firms from developed markets. Emerged market leaders should become more aware of and cultivate their own multiculturalism.Social implicationsAsymmetric multiculturalism can be accompanied by heightened awareness of global citizenship — including codes of ethics, environmental challenges, community outreach and fair labor practices — which, in tandem with CBA, can strengthen emerging market firms’ performance and reinforce their global stature and reputation.Originality/valueAsymmetric multiculturalism is a new explanatory construct in the sociological, economic and management disciplines. Emerging markets corporate leaders utilize their multicultural competence to accelerate global CBA and CSR activity and advance strategic opportunities for their firms. The identification of advantages deriving from emerging market leadership capabilities is an unusual finding given the more typical emphasis on the privileges of emerged market leaders and firms.

International Acquisitions and Labor Productivity in Serbian Cement Industry

This paper investigates the impact of international acquisitions on the productivity of acquired companies in the cement industry of the Republic of Serbia. We analyze the productivity of companies in the cement industry during the twenty-year period from 2000 to 2019. Acquisitions in the cement industry are one of the first international acquisitions realized in the Republic of Serbia. The multinational companies that took over the cement plants are from Switzerland, France and Greece. The paper analyzes the effects of international acquisitions on the productivity of acquired companies in the short and long term. The research results show that the productivity of all acquired companies improved both in the short term and in the long term after the acquisitions, with the largest productivity improvements being achieved in the short term. In addition, the research results show that Lafarge Serbia recorded the largest improvement in labor productivity, which, compared to other companies, optimized the number of employees and increased production volume.

Effects of R&D Investments and Market Signals on International Acquisitions: Evidence from IPO Firms

We investigate how intangible assets in the form of R&D influence firms’ hazards of engaging in international acquisitions. On the one hand, previous research has noted that the tacit and redeployable nature of R&D investments may prompt firms to expand their operations overseas and create value from international acquisitions. On the other hand, it is difficult for other firms to evaluate the quality and prospects of an acquirer’s intangible resources, thereby hampering its ability to finance and execute international M&A deals. In the context of international acquisitions undertaken by firms just completing their initial public offerings (IPOs), we argue and find that the IPO firm’s engagement in post-IPO international acquisition activity is generally negatively related to its R&D intensity. This effect contrasts previous arguments on the internalization advantages possessed by R&D-intensive firms. We also argue that firms able to convey their resources and prospects through such signals as previous international alliances and foreign sales can mitigate information problems presented by their intangibles, and thus carry out and benefit from cross-border acquisitions. We therefore identify an unexamined tradeoff that R&D investments present in the international M&A context and discuss how international signals can facilitate cross-border transactions subject to various market frictions.

How Country Reputation Differentials Influence Market Reaction to International Acquisitions

AbstractThis study investigates the influence of country reputation differentials on market reaction to international acquisitions. Building on social identity theory, we argue that market reactions are more positive when the reputation of the acquirer’s country is better than that of the target’s, since a country’s reputation imprints on its firms due to social categorization. Thus, firms from countries with better reputations are perceived as having superior skills/capabilities and the reputation difference suggests that the acquirer is able to identify/exploit undervalued targets and leverage synergies. The influence of country reputation should be weaker when additional information on the merging firms is present, through news media reporting and analyst coverage of the merging firms as well as the acquirer’s prior acquisition track record, since market investors will rely less on country reputation. We find support for our hypotheses for a sample of 4,792 international acquisitions across 48 countries from 2009 to 2017.

COMPARATIVE ANALYSIS OF THE STATE AND REGULATION OF AGRICULTURE IN JAPAN , SOUTH KOREA AND CHINA

The article is devoted to the study of general and special characteristics of the condition and state regulation of agriculture in three East Asian countries: China, Japan, and South Korea. It is determined that there are several historical similarities associated with the Asian way of production, low land use, high dependence on food imports, rapid urbanization and high population density. The topic of food security is relevant for all three countries. The comparative analysis made it possible to identify and specify important differences in the process and results of the modernization of agriculture in the three countries. Especially in terms of the level and speed of technical and technological development, domestic state support for agriculture, foreign trade policy, changes in the trade balance for agricultural goods, the inclusion of countries in the import of GM seeds and the production of organic food, positions in the ratings of the global food security index. The article focuses on the issues of commercialization of biotechnological crops and China's strategy aimed at future global dominance in the field of agricultural science and technology. Using the mechanism of international corporate mergers and acquisitions, the Chinese company with state participation entered the top five world leaders in the production of GM seeds and IT platforms for precision farming.

Firing Costs and the Decoupling of Technological Invention and Post-Invention Investments

We document the decoupling of invention and post-invention investment in the US. Decoupling began in the 1970s as states adopted employment protection laws that increased firing costs and played a significant role in jobless growth, the vertical and geographical fragmentation of firm activities, and underinvestment relative to Tobin’s Q. Technological inventions lead to employment growth, but employment protection laws almost fully moderate this positive effect, especially in fast-changing and high-offshore industries and for radical inventions. Firms responded to the increased firing costs by pursuing less-novel inventions, factor substitution toward capital, and offshoring through international acquisitions and JVs with manufacturing partners. Our findings suggest that decoupling serves as a critical context under which these drivers of jobless growth emerged in the 1990s and that firms aggressively manage complementary in upstream-downstream resources by adjusting geographical and vertical boundaries of the firm.

Chinese MNE acquisition of unrelated foreign businesses: The role of diversified business group affiliation, private ownership and strategic asset seeking

While the acquisition by Chinese firms of unrelated foreign businesses has become quite common, it is a highly risky undertaking not fully explained by international business scholars. Using resource-based and institutional theory, we hypothesize that affiliation with a domestically diversified business group confers pre- and post-acquisition advantages and legitimacy, fostering unrelated foreign acquisitions. In addition, we argue that private ownership as well as a motive to seek strategic assets amplify this tendency among Chinese firms affiliated to diversified groups. Ordered logit modelling for 662 Chinese cross-border M&As over a 10-year period provides support for our hypotheses. Our findings shed new light on: the distinctive characteristics of Chinese MNEs; broader conceptual arguments regarding the strategy of emerging market MNEs; the apparent paradox of why Chinese MNEs have used international acquisitions to diversify at a time when many Western diversified conglomerates are divesting non-core businesses.

How Does Cultural Distance Matter in Long-term Value Creation of Cross-border Acquisitions?

ABSTRACT This article explores the role of cultural distance on long-term value creation for Chinese acquirers based on a sample of Chinese cross-border acquisition (CBA) activities from 1999 to 2017. Our finding suggests that the long-term value creation after CBA is impeded by a greater cultural distance, and such a negative correlation is more prominent among acquirers in service or strategic emerging industries. However, this negative relationship can be mitigated by the capability of prior international acquisition experience in culturally similar countries or top managers’ overseas education experience. Through drawing upon institution-, resource/capability- and industry-based views, this article takes a step toward understanding the role of cultural distance in emerging-market enterprises' (EMEs)’ international acquisitions in the long run.