Lessons from the flipside: How do acquirers learn from divestitures to complete acquisitions? |
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Authors: | Trang Thu Doan Padma Rao Sahib Arjen van Witteloostuijn |
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Institution: | 1. Vietnam National University, International School, 144 Xuan Thuy, Cau Giay, Hanoi, Vietnam;2. Department of Global Economics and Management, Faculty of Economics and Business, University of Groningen, Nettelbosje 2, 9747 AE Groningen, The Netherlands;3. School of Economics and Business, VU University Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands |
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Abstract: | We examine whether experience from prior divestitures is associated with higher completion likelihood in subsequent acquisitions. We argue that through divestitures, firms could extract meaningful knowledge that is helpful for completing their acquisitions, such as a general understanding of acquisition deal-making stages, and the stories and aims of the target in an M&A transaction. In addition, viewing divestitures as the flipside of acquisitions, we conjecture that the selling firm can observe how the divested component of their business is acquired, and vicariously learn from these observations. We also investigate the relative importance of learning from divestiture vis-à-vis acquisition experience in determining acquisition deal completion. Finally, we contend that the effect of learning from divestitures on acquisition deal completion depends on acquisition experience and deal value. We find evidence supporting our conjectures in a sample of 2164 M&A transactions from the worldwide computer and printing industries between 1991 and 2010. |
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Keywords: | Acquisitions Divestitures Organizational learning Pre-integration process Vicarious learning |
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