Performance Implications of Mergers and Acquisitions: A Comparison of New Ventures and Established Firms

Ragozzino, R. and Reuer, J. Performance Implications of M&A: A Comparison of New Ventures and Established Firms. 2010. European Management Review, Vol. 7: 80-90

Posted: 24 Aug 2005 Last revised: 8 Apr 2014

See all articles by Roberto Ragozzino

Roberto Ragozzino

University of Liverpool; University of Tennessee

Jeffrey J. Reuer

Purdue University - Krannert School of Management

Date Written: January 1, 2010

Abstract

Recent research has documented new ventures’ activity in acquisitions, and we build upon this work and the mergers and acquisition (M&A) literature in order to compare the acquisition performance of new ventures and established firms. The central rationale for our work is that new ventures hold distinct resources and capabilities that are bound to affect the outcome of their acquisition strategies in unique ways. Thus, from a conceptual standpoint, it is appropriate to isolate the implications of M&A activity by this class of firms, rather than assume that new ventures experience the same M&A performance outcomes as other acquirers. Empirically, our findings support this broad proposition as they indicate that new ventures are more subject to due diligence and valuation problems. However, they also seem to perform better than established firms when acquiring targets with high growth opportunities.

Keywords: entrepreneurship; mergers and acquisitions; new ventures

JEL Classification: G3, M13

Suggested Citation

Ragozzino, Roberto and Reuer, Jeffrey J., Performance Implications of Mergers and Acquisitions: A Comparison of New Ventures and Established Firms (January 1, 2010). Ragozzino, R. and Reuer, J. Performance Implications of M&A: A Comparison of New Ventures and Established Firms. 2010. European Management Review, Vol. 7: 80-90 . Available at SSRN: https://ssrn.com/abstract=785913

Roberto Ragozzino (Contact Author)

University of Liverpool ( email )

Chatham Street
Liverpool, L69 7ZA
United Kingdom

HOME PAGE: http://https://www.liverpool.ac.uk/management/staff/roberto-ragozzino/

University of Tennessee ( email )

The Boyd Center for Business and Economic Research
Knoxville, TN 37996
United States

HOME PAGE: http://robertoragozzino.com

Jeffrey J. Reuer

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

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