Adding behavior to rationality on M&A deals analysis: Deviations over specialist’s usual praxis and their sources

Abstract

Value creation may not be enough when considering deals. Avoiding deviations over mergers and acquisitions (M&A) advisor’s standards is a useful behavioral add-on to deals rationality. The investigations on this theme revealed the presence of many different approaches and practices in the decision-making process and managing companies among different countries. This paper is focused on Spain through research built by in-depth interviews and surveys to specialists that shows the main three factors with a capacity to produce deviations and the main deviations created. The factors are the financing needs of the acquirer, the need to do the deal by the seller, and the different nature and role, whether industrial, managerial, or financial of the participants. Deviations found are agreements out of specialists’ usual outputs and affect deal pricing. The presence of these factors should allow capacities of alert, analysis, and bargaining and increase the value of planning, training, and management at deals frames. Rationality based on value creation might be enhanced by the fulfillment of the advisors’ criteria. The main contribution of the paper is that, to avoid deviations, might be considered a behavioral contribution to complement rationality in the complex and uncertain universe of M&A deals.

Cross-border mergers and acquisitions in the context of economic-behavioral phenomena

“…They primarily include the appreciation of free funds (when buying undervalued companies), revenue growth through an increase in market share, or by acquiring new markets, higher selling prices due to a decrease in competition, expanding the product portfolio, expanding the distribution network, reducing costs through economies of scale, cost savings in research and production, supply, sales, marketing, distribution, reducing excess capacities, technological transfer between companies, reducing taxes, etc. The growth of the firm's financial resources simultaneously leads to the potential improvement of its name, which is reflected in the growth of the firm's market value for its owners (more in Fuller et al, 2002;Choi, Russel, 2004;Oduro, Agyei, 2013;López Domínguez, 2021).…”