Exploring the Determinants of Exceptionally Large Acquisitions - Influence of Acquisition Experience and Institutional Pressure Dimensions

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Helsinki University of Technology | Diplomityö
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Yritysstrategia ja kansainvälinen liiketoiminta
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Mergers and acquisitions are complex phenomena, more so if the transaction value is very high. These large acquisitions are a challenge to the acquirers and are subjected to severe public scrutiny. Considerable academic research on the corporate acquisition phenomenon has focused on financial aspects and only limited attention given to behavioral aspects influencing acquisitions. This thesis is an effort to understand determinants and dynamisms that influence the propensity to engage in exceptionally large acquisitions. Basing the argumentation on two well known theories of acquisitions, behavioral learning and institutional behavior, the study hypothesizes that (1) acquisition experience is positively related to the propensity to engage in large acquisitions, (2) institutional pressure is positively related to the propensity to engage in large acquisitions, and (3) a firm's acquisition experience moderates the effect of institutional pressure. Quantitative empirical analysis included 1747 US public acquisitions announced between 1997 and 2000. The quantitative analysis was carried out using standard statistical analysis tools. Out of 1747 focal acquisitions there were 99 large acquisitions that had transaction value more than 5 billion USD. Qualitative analysis was performed on these 99 acquisitions using the respective acquirer's latest annual report filed before the announcement of the acquisitions. The qualitative analysis was carried out using case based analysis where each acquisition was considered as a case. The findings support the hypotheses. Experienced acquirers show a positive propensity to engage in large acquisitions. Similarly, institutional pressure increases the propensity to engage in large acquisitions. Acquisition experience weakens the effect of institutional pressure. Results from qualitative analysis show existence of various kinds of institutional pressures and their influence on corporate acquisition behavior. Qualitative analysis shows that many acquirers engaging in large acquisitions had acquisition experience. Results from both analyses provide complementary support for acquisition experience and institutional pressure arguments.
Laamanen, Tomi
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Maula, Markku
large acquisitions, behavioral learning, acquisition experience, institutional pressure, acquisition behavior, acquisiton propensity
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