M&A capability and long-term firm performance: a strategic management perspective

Abstract

PurposeThis paper investigates the puzzle of mergers and acquisitions’ (M&A) long-term performance through the strategic management perspective. The authors measure the M&A capability construct and test its relationship with the long-term performance of the firms.Design/methodology/approachThe study employs a natural language processing (NLP) methodology to quantify unstructured data from 564 annual reports and 2,602 M&A synopses from January 01, 2013 to December 31, 2016. The authors combine qualitative document analysis with a quantitative method using a multiple regression analysis model.FindingsAmong serial acquirers, M&A capability positively relates to long-term firm performance measured by both return on equity and price-to-book value. The authors also find that the size of the company and the number of acquisitions influence the M&A capability, confirming previous results in the literature.Research limitations/implicationsDetailed M&A management plans are usually confidential and not fully reported. Future studies could employ enhanced artificial intelligence tools to measure the M&A capability construct beyond filing reports, encompassing interviews, social media posts, press releases and other unstructured data sources.Practical implicationsFirms can improve their M&A capability by understanding the underlying foundation of the construct provided in the research. Additionally, researchers can build on the methodology employed using advanced NLP tools to measure M&A capability.Social implicationsImproving their M&A capability would allow firms to better choose their targets and conduct a superior integration process, which could prevent distressing mergers, unnecessary negative social impacts and culture disruption. As a result, the ensuing organization would be stronger, and the long-term performance would improve.Originality/valueThis study addresses gaps in the literature on M&A performance and provides a new empirical method to measure the M&A capability.

Are acquirers different? Identifying firm precursors to acquisitions

“…Additionally, acquisition experience providing learning has mixed research support (King et al. , 2021; Vinocur et al. , 2022) and our results suggest it is a significant indicator that a firm will complete an acquisition again.…”

“…While acquisition experience is often used as a measure of acquisition learning to predict performance with mixed support (King et al. , 2021; Vinocur et al. , 2022), it does indicate that a firm will complete an acquisition again.…”

“…For example, prior use of acquisitions is a significant predictor of acquisition activity (Hagedoorn and Duysters, 2002). While acquisition experience is often used as a measure of acquisition learning to predict performance with mixed support (King et al, 2021;Vinocur et al, 2022), it does indicate that a firm will complete an acquisition again. Second, identifying firm precursors to acquisitions confirms that acquiring firms differ from other firms.…”

The Impact of Mergers and Acquisitions on the Long-Term Performance of Securities Firms

“…Vinocur et al explored the relationship between mergers and acquisitions capabilities and long-term firm performance from a strategic management perspective. The results show that by measuring the return on equity and price-to-book ratio, there is a positive relationship between M&A ability and long-term firm performance [4].…”

Determinants of Company Value: Study on Pharmaceutical Companies on the Indonesia Stock Exchange

“…PBV (Price to Book Value) is one of the proxies to calculate the company's value (Huang et al, 2023;Yeh & Liu, 2023). A high PBV indicates a good company performance, a good PBV value is greater than 1, which indicates that the stock market value is greater than the book value (Digdowiseiso, 2023;Vinocur et al, 2023). PBV of the pharmaceutical sub-sector in Indonesia market fluctuates where three companies have a PBV value of less than 1, namely: The data in Table 1 indicates that some companies in the research sample have poor performance, so their company value is still relatively low.…”