Acquisitions by Multi-business Firms: A Divisional Lens

Abstract

In multi-business firms, mergers and acquisitions (M&As) serve as a primary growth strategy. Yet, within multi-business firms, the value of an M&A can vary substantially for the different business divisions. Despite this, divisional-level drivers of corporate acquisition decisions and the subsequent performance implications for the divisions remain insufficiently explored. This study, grounded in the internal capital market and resource redeployment theories, seeks to fill this gap by investigating a sample of 1,728 multi-business firms spanning from 1998 to 2017. The statistical findings suggest that firms engage in acquisitions to allocate resources to their more promising divisions, particularly those with higher growth prospects and greater potential for resource sharing among sister businesses. A post-hoc analysis reveals that acquisitions are associated with a rise in the performance of those divisions that are in the same business segment as the acquisition target.

Citation

Zavosh, G. and Betschinger, M.-A. (2024), "Acquisitions by Multi-business Firms: A Divisional Lens", Finkelstein, S. and Cooper, C.L. (Ed.) Advances in Mergers and Acquisitions (Advances in Mergers and Acquisitions, Vol. 23), Emerald Publishing Limited, Leeds, pp. 35-47. https://doi.org/10.1108/S1479-361X20240000023003