Enterprise Systems and M&A Outcomes for Acquirers and Targets

In stock
SKU
46.3.01

Publication History

Received: November 28, 2018
Revised: January 31, 2020; October 4, 2020; May 9, 2021; August 10, 2021
Accepted: August 12, 2021
Published Online as Articles in Advance: August 31, 2022
Published in Issue: September 1, 2022

https://doi.org/10.25300/MISQ/2022/15994

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Abstract

This study examines the impact of coordination capabilities provided by enterprise systems (ES), manifested in ES standardization and extensiveness, on merger and acquisition (M&A) outcomes in the short and long term. Specifically, we examine the extent to which the ES standardization and ES extensiveness of the acquiring and target firms contribute to value creation in M&A initiatives. We also study the relationship between the ES standardization and ES extensiveness of the acquiring and target firms and M&A offer premiums. The empirical analysis suggests that the ES standardization of acquirers is related to lower offer premiums and a higher market response to the acquisition for the acquirer. However, it is the ES extensiveness of the acquirer that improves long-term performance i.e., decreases goodwill impairment and increases operating performance. The analysis also indicates that the target’s ES standardization increases the premium for the target firm and generates a positive market response to the acquisition for the target firm. Overall, the analysis indicates that the ES standardization likely affects the integration cost that influences market response to the M&A and to the M&A premium in the short term, but it is ES extensiveness that affects the realized synergy from the M&A that affects long-term performance. 

Additional Details
Author Chengxin Cao, Gautam Ray, Mani Subramani, and Alok Gupta
Year 2022
Volume 46
Issue 3
Keywords Mergers and acquisitions (M&As), cumulative abnormal return (CAR), offer premium, goodwill impairment, operating performance, enterprise system (ES) extensiveness, enterprise system (ES) standardization
Page Numbers 1295-1322
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