Resilience and risks of cross-border mergers and acquisitions

Abstract

Purpose In cross-border mergers and acquisitions (M&As), acquirers often fail to achieve the expectations they held when they made the M&A deals. This paper aims to propose that the risks of cross-border M&As can be mitigated by building and cultivating organizational resilience as a prime means of risk management. Design/methodology/approach The research examines risks associated with cross-border M&A and how such risks can be mitigated by developing resilience. It presents dual cases of acquisitions of the biggest branded mobile phone manufacturer in Taiwan. Findings The authors find that the acquirer faces multiple risks in cross-border M&A transactions, including financial, strategic and organizational, and process risks that arise from misalignment between the goal of the M&As and the post-acquisition performance of the target firms. Originality/value The research provides theoretical insights on organizational resilience and how it can mitigate the specific risks involved in cross-border M&As, thereby developing coherent organizational resilience processes.

Surviving the Arab Spring: socially beneficial product portfolios and resilience to political shock

“…Resilience refers to the ability of the firms to respond effectively to discontinuities and recover from adverse events (Sheffi, 2005). For multinational firms, resilience has been shown to be decreased by location-bound commitments and enhanced by non-location-bound flexible capabilities (Lee et al, 2009); to be increased by low-commitment entry choices that support a real options strategy (Brouthers, 1995;Cuypers and Martin, 2007); and to be improved by pathdependent, learning-informed development of processes (Ortiz-de-Mandojana and Bansal,2016), such as due diligence and contingency planning (Hsu et al, 2019;Tan and Enderwick, 2006) and asset management capabilities (Fainshmidt et al, 2017).…”

How does experience change firms' foreign investment decisions to non-market events?

“…From the microfoundation perspective of MNCs (Kano and Verbeke, 2019), another important next step would be to explore the internal decision-making process within organizations experiencing non-market risks to better understand why managers change their response to risks from avoidance or ignorance to management. This approach might also yield insights into the organizational resilience process of how firms form different strategies and responses from similar experiences, a particularly intriguing line of inquiry since it is the heterogeneity among different firms that ultimately leads to differences in organization outcomes (Hsu et al, 2019;Kumar et al, 2020). A recent study argues that crisis management in China is different from that in western countries (Wang and Laufer, 2020).…”

Cross-border mergers and acquisitions increasing resilience to lessen risk

“…In an aim to address this void, Hsu et al (2019) examine two cross-border M&As conducted by HTC in 2011. The MNE was founded in 1997 as an Original Equipment Manufacturer (OEM) but has since progressed to become Taiwan's largest branded manufacturer of mobile phones.…”

“…Based on this evidence, Hsu et al (2019) urge firms undertaking cross-border M&As to develop types of resilience that will enhance management of specific risks. Financial resilience, strategic and organizational resilience and process resilience are noted specifically.…”