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Journal of Management & Governance

, Volume 19, Issue 1, pp 47–69 | Cite as

Learning from your investors: can the geographical composition of institutional investors affect the chance of success in international M&A deals?

  • Anna Faelten
  • Miles Gietzmann
  • Valeriya Vitkova
Article

Abstract

We produce new evidence on whether management which is keen to make foreign acquisitions can benefit from consultation with information-intensive institutional investors who have expertise in the target foreign markets. This research suggests that, in such instances, management should recognise the benefit of effective two-way communication before embarking on such costly strategies. Consistent with theoretical literature, we propose that this can be explained by the fact that complex valuation information is dispersed among many economic agents and management may only have limited access to such data. This research shows that the likelihood of both cross-border deal completion and medium-term cross-border deal success through time depends upon management learning from and getting the support of key institutional investors with regional (foreign) expertise. The theoretical information economics model presented by Dye and Sridhar in 2002 states that the information flow between management and capital markets should be viewed as two way. This study offers empirical evidence in support of their theory. This study offers insights into the positive effect of establishing a proactive investor relations programme for the recruitment of dedicated foreign institutional investors before embarking on cross-border M&A. The results indicate that management should closely monitor the share register and identify those investors who are transient and those who are, in contrast, dedicated. Attention then needs to be directed to establishing effective communication with the dedicated investors with regional expertise.

Keywords

Cross-border M&A Institutional investors Investor relations Financial geography 

Notes

Acknowledgments

The contents of this report reflect the views of the M&A Research Centre and do not necessarily reflect the views of the sponsors of the Centre. The M&A Research Centre would like to express grateful thanks to its sponsors, Credit Suisse, Ernst & Young and Mergermarket for their support and practical guidance.

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  • Anna Faelten
    • 1
  • Miles Gietzmann
    • 1
  • Valeriya Vitkova
    • 1
  1. 1.Faculty of Finance, M&A Research CentreCass Business SchoolLondonUK

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