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Acquisition completion or abandonment: The effect of revealed comparative advantagein the M&A Pre-integration process

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This paper explores the effect of revealed comparative advantage in the M&A preintegration process. Revealed comparative advantage reflects the advantage of a particular industryin trade compared to other industries. | VNU Journal of Science: Policy and Management Studies, Vol. 33, No. 2 (2017) 10-20 Acquisition Completion or Abandonment: The Effect of Revealed Comparative Advantage in the M&A Pre-integration Process Doan Thu Trang* VNU International School, Building G7-G8, 144 Xuan Thuy, Cau Giay, Hanoi, Vietnam Received 07 April 2017 Revised 05 May 2017, Accepted 28 June 2017 Abstract: This paper explores the effect of revealed comparative advantage in the M&A preintegration process. Revealed comparative advantage reflects the advantage of a particular industry in trade compared to other industries. It is measured by the share of a sector’s exports in the overall country-wide exports, compared to the share of that sector’s exports in the total exports of a group of countries. In this study, I examine whether revealed comparative advantage could determine the completion likelihood of an M&A deal and the duration of M&A pre-integration process. A binary logistic regression model and a multiple regression model were performed with a sample of 260 mergers and acquisitions to test for the possible relationships. The evidence demonstrates that revealed comparative advantage of targets can reduce the likelihood of consummating acquisition deals as well as prolong the decision-making period of M&A announcements. Additionally, revealed comparative advantage of acquirers’ industries can help to reduce the length of the preintegration phase. Keywords: Acquisition completion, acquisition abandonment, acquisition duration, revealed comparative advantage. 1. Introduction * previous studies demonstrate a number of factors that influence these two indicators, for example method of payment [5], cultural and institutional differences in cross-border acquisitions [2], and experience with prior M&A deals [4]. Despite of the contributions of these studies, the research stream on the M&A pre-integration process is still in a developmental stage, leaving significant room for further research. With