The value of target’s acquisition experience in M&A

Mohite, I. (2017) The value of target’s acquisition experience in M&A. European Journal of Finance, 23 (13). pp. 1238-1266. ISSN 1466-4364 doi: 10.1080/1351847X.2016.1212719

Abstract/Summary

Organisational learning theory predicts that firms should get better in Merger and Acquisition (M&A) deals with experience. Yet, existing studies on acquisition learning document decline in acquirer gains with acquisition experience. The lower gains in subsequent acquisition deals are likely induced by exogenous factors which can conceal the acquirer’s potential to learn with experience. To tackle this issue, this study examines the value of M&A experience by concentrating on the target firms’ prior acquisitions and investigates whether experienced deal-makers learn to negotiate the deal in favour of their shareholders when they are taken over by other firms. I find that the value created by the acquirer is inversely related to the deal-making experience of the target firm and the premium received by the target shareholders is positively related to the target’s deal-making experience. Our findings offer valuable contributions to the M&A learning literature as they suggest that deal-making skills improve with experience resulting in target firms securing more benefits for their shareholders at the expense of acquirers.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/92789
Identification Number/DOI	10.1080/1351847X.2016.1212719
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Taylor and Francis
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