MERGERS AND ACQUISITIONS

Mergers and Acquisitions

Mergers and Acquisitions

Methods

Data

The major data source for this study is the “Thomson One Banker” produced by Thomson Financial Corporation. Our study takes all cross-border M&As completed between 1985 and 2006 in which the acquiring firms are China, Brazil, Russia, and Indian based organization and the target or acquired country is a UK based Company. Because of missing values for some of the independent variables (e.g. the size of the deal or the ownership structure), the final sample size is 1,004 cross-border M&As by 671 Chinese firms. In this sample, 43.2 percent of the acquiring firms are from the financial industry (such as commercial banks and investment companies), 20.2 percent are from the manufacturing industry, and the remainder are from the services and utility industries.

Measures

Conformity in cross-border M&As

This dependent variable was measured similar to that in Westphal et al. (1997) and Yang and Chen (2007). First, for the decision of product relatedness between the acquiring and target firms, we coded 0 if the four-digit SIC codes of both parties are the same; 1 if the first two-digits of the SIC codes are the same; 2 if only the first digit of the SIC codes are the same, and 3 if none of the digits of the SIC codes are the same. Second, we calculated the percentage of other M&As in the same time period whose response matched the focal firm's response. The higher the percentage is, the higher the degree of conformity in this decision.

The same procedure was used for the decision of target location. First, we coded 1-11 for the different countries, such as the USA, Canada, or the UK. Thereafter, we calculated the percentage of other M&As in the same time period whose response matched the focal firm's response. As to the decision regarding ownership structure, when the acquiring firm owns 100 percent it was coded 1; when the acquiring firm has the majority share (above 50 percent but less than 100 percent) it was coded 2; when the acquiring firm has exactly a 50 percent share, it was coded 3; and when the acquiring firm has less than a 50 percent share, it was coded 4. Then, again, we calculated the percentage of other M&As in the same time period whose response matched the focal firm's response. This becomes the measure of conformity in the ownership structure. In terms of the size of the M&A deal, four cut-off values ($10, 50, 100, and 500 million) were used to generate five categories of transaction size. We then followed the second-step mentioned above to calculate the percentage of these five categories in each period. In so doing, we formulated the conformity of the transaction size.

Finally, we combined the percentages across these four strategic decisions, yielding an overall measure of conformity for each firm. In the regression analyses, the individual conformity measure for these four decisions and the overall measure were all tested to see if the different aspects of the M&A were affected equally by conformity ...