Target choice and unique synergies in global mobile telephony: a dyadic approach

Abstract

The success of acquisitions rests on detecting and realizing unique synergies between buyer and target through their dyadic relationships. We study the role of unique dyad-specific synergies in the selection of takeover targets in the global mobile telecommunications industry. Firms use their foresight to select specific targets: First, they lower integration costs by selecting geographically close targets. This effect is stronger when buyer and target are in the same country, but only if the market is not so concentrated that it provokes regulatory interventions. Second, they select targets that can be acquired at a modest bid premium because they have asymmetric bargaining power. Finally, they select targets which can generate significant synergies due to technological synergies. Our work expands the existing target selection literature by studying dyad-specific factors within a single industry. This helps us in identifying unique synergies as drivers of acquisition performance.

Ownership similarity in mergers and acquisitions target selection

“…There is an abundant literature on the antecedents of acquisitions, and numerous studies have found qualities such as industry similarity, firm strategic correspondence, and geographic and demographic similarity to spur acquisition behavior (Boschma et al, 2016; Capron and Shen, 2007; Claussen et al, 2018; Kaul and Wu, 2016; Rao et al, 2016). Some studies have also investigated the role of ownership structure, though solely from the perspective of the acquiring firm (Gomez-Mejia et al, 2018; Miller et al, 2010).…”

“…Within the realm of M&A, some studies have envisioned similarity as strategic likeness to demonstrate that acquisitions within similar business domains outperform those spanning more disparate domains (Bauer and Matzler, 2014; Capron et al, 2001; Chatterjee, 1986; Datta, 1991; Lubatkin, 1987; Ramaswamy, 1997; Tanriverdi and Venkatraman, 2005). In a parallel vein, strategic similarities in industry, technology, or capability overlap have been used to predict the selection of which target to acquire (Berchicci et al, 2012; Claussen et al, 2018; Kaul and Wu, 2016; Valentini and Di Guardo, 2012; Villalonga and McGahan, 2005; Wang and Zajac, 2007).…”

“…That same concept has been studied in the management literature, where similarity has been seen to influence both the likelihood of matching and its outcomes. Confirmed qualities found to encourage partner selection include similarity in industry, culture, networks, geography, technology, and some aspects of strategy (Boschma et al, 2016;Capron and Shen, 2007;Chakrabarti and Mitchell, 2016;Claussen et al, 2018;Rogan and Sorenson, 2014). Rationales given for these findings include operating synergies, reduction of frictions, and potential for capability leveraging.…”

Acquirers’ Reception of Signals in M&A Markets: Effects of Acquirer Experiences on Target Selection

“…Acquisitions are an important way in which acquirers obtain critical resources and capabilities in technology industries (Graebner et al, 2010; Higgins and Rodriguez, 2006; Ransbotham and Mitra, 2010). One stream of research within the long tradition of M&A studies has emphasized the importance of target selection, and the question of who buys whom has attracted increasing research attention (Capron and Shen, 2007; Claussen et al, 2018; Kaul and Wu, 2016; Schildt and Laamanen, 2006; Welch et al, 2020; Yu et al, 2016). Drawing on competence‐based perspectives, most research on target selection shows the relevance of resource and knowledge relatedness, yet acquirers can also face serious difficulties and costs of judging the technological resources and other capabilities of high‐tech ventures in the first place.…”

Follow the Crowd or Follow the Trailblazer? The Differential Role of Firm Experience in Product Entry Decisions in the US Video Game Industry

“… For a similar procedure that studies the selection of one choice (in their case, takeover target) from a large number of potential (but unrealized) choices, see Claussen et al (). …”