(The) role of the target in determining acquisition premiums and acquisition performance

Abstract

Extant acquisition research has focused on exploring how and when firms can learn from prior acquisition experience. However, these studies have centered largely on the acquirer whereas the role of the target remains largely underexplored. As a result, this dissertation aims to fill this gap by examining how the target can influence the acquirer's acquisition experience. To do so, I first focus on exploring how the firm’s backward-looking prior acquisition returns influence the forward-looking acquisition premium decision. I posit and find that the firm’s prior acquisition returns increases the focal acquisition premium. Furthermore, the target’s characteristics can act as a mechanism that triggers a forward-looking search to reduce the influence of the firm’s prior acquisition returns, leading to a lower focal acquisition premium. Second, I examine if an Acquirer CEO’s prior acquisition experience as a target (ex-TCEO experience) leads to superior acquisition returns. Drawing on the acquisition capabilities literature, I hypothesize and find that the ex-TCEO experience leads to superior acquisition returns and that this value comes from the ex-TCEO’s ability to better identify, negotiate and integrate targets than CEOs without such experience.