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Evidence of acquiror learning in mergers and acquisitions, 1985-1995

Mathew Lisle Alister Hayward, 1999
Faculty Advisor: Donald C. Hambrick
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Abstract

This dissertation uses organizational learning theory to explain and predict whether and when acquirors learn from direct and vicarious acquisition experience. Direct experience is conceived as the amount, nature, timing, performance and management of a focal firm's own acquisition experience. Vicarious experience is conceived as the learning derived from the focal acquiror's industry competitors and professional advisors. Firms learn when they have direct and vicarious experiences which can increase their acquisition performance.

The acquisition experience of 20 acquirors from 6 industries is tracked from 1985 to 1995 to study this question. The acquisitions of these firms from 1985-1995 form an experience base that affects focal acquisition performance, or the performance of acquisitions occurring from 1990-1995. Results suggest that acquirors experience better acquisition performance when (1) they are managed by CEOs with longer tenure at the firm; (2) there is a moderate temporal interval since their prior acquisition; (3) they have previously undertaken acquisitions of different sizes; (4) they have made small, prior acquisition mistakes; and (5) they do not use investment banking advisors. Contrary to my expectations, greater acquisition experience did not increase focal acquisition performance. Taken together, these results suggests that acquirors, learn more from direct than vicarious experience. Further, the nature, timing and performance of prior acquisitions, rather than the amount of experience, is beneficial to acquisition performance.

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