Designing optimal M&A strategies under uncertainty
Autor(a) principal: | |
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Data de Publicação: | 2019 |
Outros Autores: | , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | https://hdl.handle.net/1822/65725 |
Resumo: | The recent surge in M&A activities highlights firms' motivation to gain or maintain market leadership. Along with the unparalleled volume of M&As, more and more firms favor establishing acquisition programs that lead to multiple subsequent M&As over time. In this paper, we study the entrance in a market by means of M&A when different strategies to acquire a prominent incumbent are available to the acquirer. In particular, the firm might opt for a big leap, where it acquires the prominent incumbent; the alternative is to design an acquisition program that allows moving in small steps by acquiring a minor company first and the larger prominent player later on. We employ a dynamic game-theoretic real options model to investigate the effect of uncertainty and synergies on the strategy choices and also consider alternative contract designs for the acquisition program, such as hostile, friendly or mixed. Our findings reveal that firms prefer acquisition programs to big leap strategies when the industry exhibits high levels of uncertainty and can occur even when the acquisition of the first target destroys value. Moreover, some acquisition programs profit from a first mover pass-through where the acquirer can jointly utilize his first-mover advantage when negotiating with multiple targets. Finally, novel testable hypotheses are derived from the model. (C) 2019 Elsevier B.V. All rights reserved. |
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Designing optimal M&A strategies under uncertaintyM&AReal optionsSequential investmentCooperative and non-cooperative bargainingM&AM&ACiências Sociais::Economia e GestãoSocial SciencesThe recent surge in M&A activities highlights firms' motivation to gain or maintain market leadership. Along with the unparalleled volume of M&As, more and more firms favor establishing acquisition programs that lead to multiple subsequent M&As over time. In this paper, we study the entrance in a market by means of M&A when different strategies to acquire a prominent incumbent are available to the acquirer. In particular, the firm might opt for a big leap, where it acquires the prominent incumbent; the alternative is to design an acquisition program that allows moving in small steps by acquiring a minor company first and the larger prominent player later on. We employ a dynamic game-theoretic real options model to investigate the effect of uncertainty and synergies on the strategy choices and also consider alternative contract designs for the acquisition program, such as hostile, friendly or mixed. Our findings reveal that firms prefer acquisition programs to big leap strategies when the industry exhibits high levels of uncertainty and can occur even when the acquisition of the first target destroys value. Moreover, some acquisition programs profit from a first mover pass-through where the acquirer can jointly utilize his first-mover advantage when negotiating with multiple targets. Finally, novel testable hypotheses are derived from the model. (C) 2019 Elsevier B.V. All rights reserved.This work was carried out within the funding with COMPETE reference no. POCI-01-0145-FEDER-006683 (Artur Rodrigues) and POCI-01-0145-FEDER-006890 (Paulo J. Pereira), FCT/MEC's (Fundacao para a Ciencia e a Tecnologia, I.P.), and ERDF through the Operational Programme on Competitiveness and Internationalization - COMPETE 2020 under the PT2020 Partnership Agreement. We thank the Editor and the three anonymous referees for their valuable comments and suggestions. We also thank Lenos Trigeorgis, Dean Paxson, Han Smit, Kuno Huisman, Shahriar Khaksari, Nick Huberts, Arkadiy Sakhartov, and participants of the 2017 Annual Real Options Conference in Boston for their helpful comments. Any remaining errors are the sole responsibility of the authors.Elsevier Science BVUniversidade do MinhoLukas, ElmarPereira, Paulo J.Rodrigues, Artur2019-07-012019-07-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/1822/65725engLukas, E., Pereira, P. J., & Rodrigues, A. (2019). Designing optimal M&A strategies under uncertainty. Journal of Economic Dynamics and Control, 104, 1-200165-188910.1016/j.jedc.2019.04.006https://www.sciencedirect.com/science/article/pii/S0165188919300703info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-10-07T01:22:19Zoai:repositorium.sdum.uminho.pt:1822/65725Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T19:50:07.003157Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Designing optimal M&A strategies under uncertainty |
title |
Designing optimal M&A strategies under uncertainty |
spellingShingle |
Designing optimal M&A strategies under uncertainty Lukas, Elmar M&A Real options Sequential investment Cooperative and non-cooperative bargaining M&A M&A Ciências Sociais::Economia e Gestão Social Sciences |
title_short |
Designing optimal M&A strategies under uncertainty |
title_full |
Designing optimal M&A strategies under uncertainty |
title_fullStr |
Designing optimal M&A strategies under uncertainty |
title_full_unstemmed |
Designing optimal M&A strategies under uncertainty |
title_sort |
Designing optimal M&A strategies under uncertainty |
author |
Lukas, Elmar |
author_facet |
Lukas, Elmar Pereira, Paulo J. Rodrigues, Artur |
author_role |
author |
author2 |
Pereira, Paulo J. Rodrigues, Artur |
author2_role |
author author |
dc.contributor.none.fl_str_mv |
Universidade do Minho |
dc.contributor.author.fl_str_mv |
Lukas, Elmar Pereira, Paulo J. Rodrigues, Artur |
dc.subject.por.fl_str_mv |
M&A Real options Sequential investment Cooperative and non-cooperative bargaining M&A M&A Ciências Sociais::Economia e Gestão Social Sciences |
topic |
M&A Real options Sequential investment Cooperative and non-cooperative bargaining M&A M&A Ciências Sociais::Economia e Gestão Social Sciences |
description |
The recent surge in M&A activities highlights firms' motivation to gain or maintain market leadership. Along with the unparalleled volume of M&As, more and more firms favor establishing acquisition programs that lead to multiple subsequent M&As over time. In this paper, we study the entrance in a market by means of M&A when different strategies to acquire a prominent incumbent are available to the acquirer. In particular, the firm might opt for a big leap, where it acquires the prominent incumbent; the alternative is to design an acquisition program that allows moving in small steps by acquiring a minor company first and the larger prominent player later on. We employ a dynamic game-theoretic real options model to investigate the effect of uncertainty and synergies on the strategy choices and also consider alternative contract designs for the acquisition program, such as hostile, friendly or mixed. Our findings reveal that firms prefer acquisition programs to big leap strategies when the industry exhibits high levels of uncertainty and can occur even when the acquisition of the first target destroys value. Moreover, some acquisition programs profit from a first mover pass-through where the acquirer can jointly utilize his first-mover advantage when negotiating with multiple targets. Finally, novel testable hypotheses are derived from the model. (C) 2019 Elsevier B.V. All rights reserved. |
publishDate |
2019 |
dc.date.none.fl_str_mv |
2019-07-01 2019-07-01T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
https://hdl.handle.net/1822/65725 |
url |
https://hdl.handle.net/1822/65725 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Lukas, E., Pereira, P. J., & Rodrigues, A. (2019). Designing optimal M&A strategies under uncertainty. Journal of Economic Dynamics and Control, 104, 1-20 0165-1889 10.1016/j.jedc.2019.04.006 https://www.sciencedirect.com/science/article/pii/S0165188919300703 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Elsevier Science BV |
publisher.none.fl_str_mv |
Elsevier Science BV |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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