Acquirer reputation in mergers and acquisitions

Reputation is a firm’s key intangible assets for shareholders’ value creation. Reputation building is a firm’s corporate strategy approach that is vital for the firm in order to sustain itself in this competitive global world. The influence of reputation on firm’s performance, decision making, employee retainment, cost reduction, and partner selection have been studied and documented by academics. Despite this, there have been insufficient studies on reputation and mergers and acquisitions (M&A) activity. M&As are an important corporate strategy that firms use to survive and expand their global market. In the UK, both the number and value of domestic and cross-border M&As has increased significantly over the years. Drawing from the emerging popularity of reputation and the increased amount of M&A activity by UK acquirers, this thesis investigates the relation between reputation and UK acquirer M&A activity.
This thesis focuses on three main issues: (1) the impact of reputation on acquirer cross-border M&A returns; (2) the relation between reputation and UK acquirer domestic and cross-border deal completion time; and (3) the relation between UK acquirer reputation and target’s ownership nature.
Firstly, event-time and calendar-time approaches are used to examine UK acquirer cross-border M&A returns. The result reveals a significant relation between reputation and acquirer M&A returns. The author finds high reputation acquirers earned significant cross-border event-time and calendar-time returns. Secondly, this study finds a significant positive relation between acquirer reputation and domestic and cross-border deal completion time. This result implies that a high reputation acquirer takes more time to complete a deal. Lastly, the author finds a high reputation acquirer is more likely to choose a public target over a private target in domestic and cross-border M&As. However, the author finds a mixed result for subsidiaries: a high reputation acquirer is more likely to choose a subsidiary for a cross-border M&A, and less likely to for a domestic M&A.