Political uncertainty and deal structure: Evidence from Australian mining project acquisitions

This study investigates whether acquisition deal structure matters in mitigating political uncertainty-related costs. Utilizing a large hand-collected sample of 3283 project acquisitions by Australian mining exploration entities over 1998–2017, we find that acquirers tend to structure transactions in stages in response to high political uncertainty. In addition, the stock market reacts more favourably to staged acquisitions than non-staged acquisitions when higher political uncertainty is observed. Further, we identify three potential mechanisms through which staged acquisitions help acquirers reduce the negative consequences of political uncertainty: low abandonment costs, the securing of overseas targets, and long contract duration. Overall, our findings underscore the importance of staged deal structure as an uncertainty-mitigation strategy in acquisitions.