“Competitor Reactions as an Explanation of Lower Acquisition Performance” by Dr. David R. King
Dr. David R. King
Associate Professor of Management
College of Business
Iowa State University
Mergers and acquisitions are common in practice despite repeated research questioning whether acquisitions create value. This study integrates acquisition research with competitive dynamics to empirically test developed theory and hypotheses that suggest acquisition performance is lower than expected due to competitor retaliation. Results from a survey of 114 managers in German speaking firms during 2015 demonstrate that acquisition characteristics often within managerial control impact the likelihood of competitor retaliation that can lower acquisition performance. Specifically, data support that competitor responses impact acquisition performance, especially when acquirer and target size differ, acquisitions involve consolidation, and for acquisitions early in a merger wave. While the likelihood of competitor retaliation is complex and intertwined with a number of considerations by managers in an acquiring firm, the combination of competitive dynamics with acquisition research offers an explanation for why acquisition performance is lower than expected due to competitor reactions.