Value creation in acquisitions: A re‐examination of performance issues

Anju Seth

506 citations0/0 files storedStrategic Management Journal

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Corporate Finance and Governance Merger and Competition Analysis Financial Reporting and Valuation Research

Abstract

Abstract This study provides a conceptual framework and an empirical methodology to assess the extent of value creation in acquisitions. Arguments are presented to examine why related acquisitions might not outperform unrelated acquisitions on average. New measures of value creation are developed which resolve the difficulties with measures used by earlier researchers. In addition, the influence of the classification scheme used to identify acquisition types, and the impact of the relative size of the target to the bidder, on the measurement of the extent of value creation, is examined. The empirical results indicate that value is created in both unrelated and related acquisitions. Further, the data do not appear to indicate that related acquisitions create more value than unrelated acquisitions on average.

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References

1982Contestable Markets and the Theory of Industry Structure 1981Risk Reduction as a Managerial Motive for Conglomerate Mergers 1974Strategy, structure, and economic performance 1982Contestable Markets and the Theory of Industry Structure 1989From Competitive Advantage to Corporate Strategy 1975Strategy, structure, and economic performance 1964A Theory of Oligopoly 1980Economies of scope and the scope of the enterprise

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1999Redeployment of Brands, Sales Forces, and General Marketing Management Expertise Following Horizontal Acquisitions: A Resource-Based View 2013Ambidexterity under scrutiny: Exploration and exploitation via internal organization, alliances, and acquisitions 2007Alliance or acquisition? a dyadic perspective on interfirm resource combinations 2005The impact of M&A on the R&D process 2002On the Discursive Construction of Success/Failure in Narratives of Post-Merger Integration 2001

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