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The importance of targets and value creation in vertical acquisitions

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  • Manapol Ekkayokkaya
  • Krishna Paudyal

Abstract

We study how value creation in vertical acquisitions varies in the importance of the target's assets to its acquirer. The synergistic gain increases in the degree of vertical relatedness between the acquirer and target industries. This finding suggests that the importance of the target firm's assets to its acquirer's productivity is an important value‐creating channel in vertical acquisitions. We also find evidence suggesting that acquirers extract greater value as the synergistic gain increases, consistent with an efficient investment incentive underlying the integration decision.

Suggested Citation

  • Manapol Ekkayokkaya & Krishna Paudyal, 2021. "The importance of targets and value creation in vertical acquisitions," International Review of Finance, International Review of Finance Ltd., vol. 21(2), pages 636-644, June.
    • Handle: RePEc:bla:irvfin:v:21:y:2021:i:2:p:636-644
    DOI: 10.1111/irfi.12280
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    References listed on IDEAS

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    Cited by:

    1. Genc, Omer F. & Luo, Dan, 2024. "A different view on acquisition paradox: Empirical examination of international acquisitions from competitiveness perspective," Journal of Economics and Business, Elsevier, vol. 130(C).

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