Left at the Altar? Target Uncertainty, Acquirer Strategic Capabaility, and Dyadic Alignment in Mergers and Aquisitions

Abstract:     
In this paper, we analyze data on the world's largest merger and acquisition (M&A) announcements in the 1990s to explore the relational factors that determine their completion or withdrawal. Existing research on this little understood phenomenon in the M&A process typically focuses on the characteristics and actions of acquirer firms to understand financial and strategic M&A elements. We offer a new perspective by focusing on the dyadic relationship between acquirer and target firms. Controlling for strategic and financial factors, we find that the completion of an announced M&A is more likely to the extent that the relational capabilities stemming from country-level, industry-level and organizational-level factors generate a cooperative and trustworthy relationship. We conclude by discussing theoretical and managerial implications of our multi-level relational model.

Keywords: merger, acquisition, M&A, corporate governance, announcements

JEL Classifications: D21, D23, D74, D81, G34, F23, G3, F23, K21

Working Paper Series