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Why do some merger and acquisitions deals fail? A global perspective

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  • Rexford Attah‐Boakye
  • Yilmaz Guney
  • Elvis Hernandez‐Perdomo
  • Johnathan Mun

Abstract

We analyse why some merger and acquisitions (M&A) deals are withdrawn paying particular attention to the economic freedom and legal environment of countries. We use a large dataset based on deals worldwide from over 140 countries during the period 1977–2014. Our core finding is that the likelihood of a deal's withdrawal tends to increase if the economic freedom/quality of legal environment of the acquiring (target) firm's country is higher (lower). These core findings matter more for the non‐financial sector, during non‐crisis years, and in developed financial markets. We also report that the deals have higher tendency to be withdrawn if the target firm's size is larger or its profitability is lower; and the acquiring firm's size is smaller. Furthermore, our analyses reveal that deal characteristics (i.e., deal attitude, means of payment, deal size, ownership sought) also matter in affecting the outcome of announced M&A deals.

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  • Rexford Attah‐Boakye & Yilmaz Guney & Elvis Hernandez‐Perdomo & Johnathan Mun, 2021. "Why do some merger and acquisitions deals fail? A global perspective," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4734-4776, July.
    • Handle: RePEc:wly:ijfiec:v:26:y:2021:i:3:p:4734-4776
    DOI: 10.1002/ijfe.2039
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    Cited by:

    1. Campbell, Robert J. & Limbach, Peter & Reusche, Johannes, 2022. "Once bitten, twice shy: Failed deals and subsequent M&A cautiousness," CFR Working Papers 22-09, University of Cologne, Centre for Financial Research (CFR).
    2. Adams, Dawda & Adams, Kweku & Attah-Boakye, Rexford & Ullah, Subhan & Rodgers, Waymond & Kimani, Danson, 2022. "Social and environmental practices and corporate financial performance of multinational corporations in emerging markets: Evidence from 20 oil-rich African countries," Resources Policy, Elsevier, vol. 78(C).
    3. Dang, Man & Henry, Darren & Thai, Hong An & Vo, Xuan Vinh & Mazur, Mieszko, 2022. "Does policy uncertainty predict the death of M&A deals?," Finance Research Letters, Elsevier, vol. 46(PB).
    4. Shaojie Lai & Xiaoling Pu & Qing (Sophie) Wang & Jianing Zhang, 2023. "Reference prices and withdrawn acquisitions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4365-4384, October.
    5. Wang, Qiping & Yiu Keung Lau, Raymond, 2024. "Social mood and M&A performance: An empirical investigation enhanced by multimodal analytics," Journal of Business Research, Elsevier, vol. 176(C).
    6. Byrka-Kita Katarzyna & Czerwiński Mateusz & Bajerska Aurelia, 2023. "Does deterioration in rule of law per se create or destroy value?," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 59(4), pages 277-296, December.

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