The opportunities and challenges of entrepreneurial acquisitions

Abstract

Recent research has documented new ventures activity in acquisitions, and we build upon this work and the mergers and acquisition (MA) literature in order to compare the acquisition performance of new ventures and established firms. The central rationale for our work is that new ventures hold distinct resources and capabilities that are bound to affect the outcome of their acquisition strategies in unique ways. Thus, from a conceptual standpoint, it is appropriate to isolate the implications of MA activity by this class of firms, rather than assume that new ventures experience the same MA performance outcomes as other acquirers. Empirically, our findings support this broad proposition as they indicate that new ventures are more subject to due diligence and valuation problems. However, they also seem to perform better than established firms when acquiring targets with high growth opportunities. © 2010 EURAM Macmillan Publishers Ltd. All rights reserved.