Predicting divestiture of unrelated acquisitions: an integrative model of ex ante conditions

The majority of unrelated acquisitions are divested shortly after their purchase. Often, those acquisitions‐turned‐divestitures result in strategic, organizational, and financial losses for both the acquiring and the acquired companies. To consider how such divestitures can be avoided, this study examined some of the differences between divested and retained unrelated acquisitions. The study integrated four explanations for why unrelated acquisitions occur and related them to the fates of such acquisitions. Unrelated acquisitions were hypothesized to be divested when they fail to realize some motives and expectations that prevailed at the time of acquisition. Two samples of unrelated acquisitions (135 from 1977 and 140 from 1987) were tracked over 5‐year periods. The results indicate that motives and conditions at the time of acquisition, and changes in those motives and conditions, were related to the fates of the acquisitions. In addition, the relative importance of those factors varied across the periods studied. Discriminant analyses further demonstrate that most divestitures could be predicted correctly on the basis of those motivations and conditions. The implications of the findings are discussed. © 1997 John Wiley & Sons, Ltd.