Failed Hostile Acquisition Attempts and Refocusing

Abstract

To better understand how a hostile merge and acquisition (M&A) attempt acts as signaling mechanism and influences a target firm’s reaction after they rejected the M&A this study identified four predictors related to a target firm’s prior strategies and performance and investigated how these factors affect target firms’ choice of whether to refocus or not Based on agency theory this study argued that target firms with wider business coverage ex ante defensive plans lower performance growth and lesser slack resources are more likely to regard the hostile acquisition as a ‘wake-up call’ and it would motivate them to take refocusing actions in order to avoid future hostile acquisitions These hypotheses were empirically tested by using a sample of 292 U S-based target firms of failed hostile acquisitions between 1991 and 2017 This study found a positive impact of business coverage and a negative impact of ex ante defensive plan on the likelihood of refocusing However it is also shown that the influence of performance growth and slack resources are not salient This study suggests that ex ante factors can help predict change in business strategies following a failed M&A

Date of Award	2019
Original language	English
Supervisor	Chiung-Hui Tseng (Supervisor)