Lessons from the flipside: How do acquirers learn from divestitures to complete acquisitions?

Trang Thu Doan*, Padma Rao Sahib, Arjen van Witteloostuijn

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

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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.

Original languageEnglish
Pages (from-to)252-266
Number of pages15
JournalLong Range Planning
Volume51
Issue number2
DOIs
Publication statusPublished - 1 Apr 2018

Keywords

  • Acquisitions
  • Divestitures
  • Organizational learning
  • Pre-integration process
  • Vicarious learning

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