Determinants of Cross-border Acquisition Completion: A Study of Acquisitions by Indian Firms

Abstract

While cross-border acquisitions by emerging economies are increasing over time, a significant percentage of deals are withdrawn before completion. By integrating the ‘organizational learning lens perspective’ with the ‘signalling lens perspective’, this study aims to investigate deal-specific, firm-specific and country-specific factors that can increase the likelihood of deal completion. The analysis is based on 16 years of data from a prominent emerging economy: India, from 2005 to 2021. A binary logistic regression model is used to understand the determinants of deal completion. Additionally, standard event study methodology is deployed for a particular firm-specific determinant (market reaction to deal announcement) to develop a proxy for the variable. Our findings indicate that factors which enhance learning during the acquisition process and communicate strong and positive signals to build trust between the acquirer and target positively impact the completion of announced acquisitions. Specifically, we report that acquisitions using cash as the payment method and those that receive positive market reactions at the time of acquisition announcement exhibit a higher likelihood of completion. In contrast, the prior failure experience of the acquirer has a detrimental impact on the likelihood of deal completion. The empirical results have important implications for improving the success of cross-border deals from emerging nations.