The relevance of political affinity for the initial acquisition premium in cross-border acquisitions

• 成果类型: Article
• 署名作者: Bertrand, Olivier; Betschinger, Marie-Ann; Settles, Alexander
• 署名单位: SKEMA Business School; Universite de Lille; University of Fribourg; HSE University (National Research University Higher School of Economics); HSE University (National Research University Higher School of Economics); Rutgers University System; Rutgers University Newark; Rutgers University New Brunswick
• 刊物名称: STRATEGIC MANAGEMENT JOURNAL
• ISSN/ISSBN: 0143-2095
• DOI: 10.1002/smj.2438
• 发表日期: 2016
• 页码: 2071-2091
• 关键词: international relations; Political affinity; Cross-border mergers and acquisitions; acquisition premium; bidding strategy

摘要

Research summary: In the context of economic nationalism, we investigate the relevance of political affinity between countries to the initial acquisition premium offered in cross-border acquisitions. Political affinity is defined as the similarity of national interests in global affairs. We argue that political affinity affects how foreign acquirers anticipate their bargaining position in their negotiations with domestic target firms. With decreasing political affinity, the host government becomes increasingly likely to intervene against foreign firms in an acquisition deal. Consequently, foreign acquirers need to provide a more lucrative initial offer to dissuade target firms from leveraging government intervention to oppose the acquisition. Our prediction is supported by strong evidence that political affinity, as revealed by UN general assembly voting patterns, leads to lower initial acquisition premiums.Managerial summary: Media reports suggest that politics plays an important role in international business transactions. However, we still know very little about how bilateral political relations affect corporate decision-making. In this article, we analyze the influence of the quality of bilateral political relations on the bidding behavior of foreign acquirers in cross-border acquisitions. We argue that the host government is more likely to intervene against the foreign acquirer during deal negotiations if the quality of bilateral political relations is poor. A lower political affinity between countries therefore decreases the bargaining power of the acquirer and pushes up the initial bid premium the acquirer has to offer to the local target. Our empirical results confirm our argument. Copyright (c) 2015 John Wiley & Sons, Ltd.