The role of corporate political strategies in M&As

In line with the view that politics can complicate M&A deals, we find that firms contributing to political action committees or involved in lobbying are less likely to be acquired and their takeover process is lengthier. As we empirically show, this can be explained by the fact that politicians have motives to interfere with the takeover process due to career concerns, in terms of getting re-elected and raising funds for future campaigns. We also document that politically connected target firms command higher takeover premiums from bidders lacking political expertise, consistent with the notion that the market regards target firms' connections, not easily replicable by bidders, as means to enhance growth opportunities of the merged firm.