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Inter-firm linkages and M&A returns

Author

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  • Krolikowski, Marcin W.
  • Adhikari, Hari P.
  • Malm, James
  • Sah, Nilesh B.

Abstract

This study investigates the value of customer/supplier relationships in mergers and acquisitions. The findings indicate that targets (suppliers) with strong customer/supplier relationships obtain higher abnormal returns and higher merger premiums when compared to targets with weak customer/supplier relationships. However, targets with a strong connection to a customer have a lower chance of being acquired. Acquirers that purchase targets with strong customer/supplier relationships have negative long run abnormal returns suggesting that the acquirers may have overpaid for these targets. The implications of customer/supplier relationships on customers, rivals, and competing rivals are presented.

Suggested Citation

  • Krolikowski, Marcin W. & Adhikari, Hari P. & Malm, James & Sah, Nilesh B., 2017. "Inter-firm linkages and M&A returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 135-146.
    • Handle: RePEc:eee:quaeco:v:63:y:2017:i:c:p:135-146
    DOI: 10.1016/j.qref.2016.04.009
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    Cited by:

    1. Dong, Yizhe & Li, Chang & Li, Haoyu, 2021. "Customer concentration and M&A performance," Journal of Corporate Finance, Elsevier, vol. 69(C).
    2. Chen, Sheng-Syan & Lin, Chih-Yen, 2018. "Managerial ability and acquirer returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 171-182.

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    More about this item

    Keywords

    Mergers; Acquisitions; Networks; Contracting;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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