The Role of Internal M&A Teams in Takeovers

Abstract

This paper provides insights into the inner workings of internal corporate M&A teams using survey evidence from 65 firms from Austria, Germany, and Switzerland. We find that internal teams create value, especially relative to external advisors, by directing transaction rationales, screening targets, and employing performance metrics to assess post-merger success. Teams emphasizing economic rationales as a merger motive are associated with higher returns than those teams more apt to consider behavioral motives. We consider several team characteristics and find that financial experience is the most persistent and significant attribute in explaining the outcomes across various deal stages. Another key result from our survey-based evidence is that latent M&A team factors explain approximately 54% of the acquirer fixed effects in announcement return regressions.

Consequences of M&A team composition for deal outcomes: An inductive study

“…Our study answers the call for more research on M&A team characteristics in relation to M&A performance ( Aktas et al, 2021 ). Hence, by adopting a team perspective, we try to provide more insight into the M&A process and its outcomes.…”

“…As such, various perspectives on M&A deal outcomes have been offered over the past decades ( Haleblian et al, 2009 ). What is striking, however, is that little research attention has been given to the role of a team that manages M&A transactions ( Aktas et al, 2021 ). This focus is, however, highly important considering the effects of M&A teams and their composition on the M&A deal success ( Aktas et al, 2021 ).…”

“…What is striking, however, is that little research attention has been given to the role of a team that manages M&A transactions ( Aktas et al, 2021 ). This focus is, however, highly important considering the effects of M&A teams and their composition on the M&A deal success ( Aktas et al, 2021 ). Specifically, research shows that M&A teams have an important influence on the rationales behind deal making and on the screening of potential takeover targets ( Aktas et al, 2021 ).…”

“…This focus is, however, highly important considering the effects of M&A teams and their composition on the M&A deal success ( Aktas et al, 2021 ). Specifically, research shows that M&A teams have an important influence on the rationales behind deal making and on the screening of potential takeover targets ( Aktas et al, 2021 ). For example, teams with strong financial expertise are found to be more prudent in their evaluation techniques and to exhibit a higher level of diligence, thus increasing negotiations time ( Aktas et al, 2021 ; Graham and Harvey, 2001 ).…”

“…Specifically, research shows that M&A teams have an important influence on the rationales behind deal making and on the screening of potential takeover targets ( Aktas et al, 2021 ). For example, teams with strong financial expertise are found to be more prudent in their evaluation techniques and to exhibit a higher level of diligence, thus increasing negotiations time ( Aktas et al, 2021 ; Graham and Harvey, 2001 ). In turn, teams with higher managerial overconfidence often act faster, but could be more prompt to decision errors ( Malmendier and Tate, 2008 ).…”