Who Acquires Whom? The Role of Geographical Proximity and Industrial Relatedness in Dutch Domestic M&As between 2002 and 2008

Abstract

In economic geography, geographical proximity has been identified as a key driver of M&A activity. In this context, little attention has yet been drawn to the effect of industrial relatedness, which refers to the similarity and complementarity of business activities. We examine 1,855 domestic M&A deals announced between 2002 and 2008 in the Netherlands, and we assess the extent to which geographical proximity and industrial relatedness affect M&A partnering. Our study shows that geographical proximity drives domestic M&A deals, even at very detailed spatial scales like the municipality level. We also found evidence that companies that share the same or complementary industries are more likely to engage in an M&A deal. Logistic regressions show that the effect of industrial relatedness is stronger than the effect of geographical proximity and that the effect of geographical proximity is stronger in unrelated than related target selection.

Symmetric and asymmetric effects of proximities. The case of M&A deals in Italy

“…There is a huge literature on the determinants of M&As, as well as an increasing number of studies on M&A partnering that adopt, either implicitly or explicitly, a proximity framework (e.g. Böckermann and Letho, 2006;Eun and Mukherjee, 2006;Grote and Umber, 2006;Schildt and Laamanen, 2006;Chakrabarti and Mitchell, 2013;Di Guardo et al, 2013;Ellwanger and Boschma, 2013).…”

“…Our paper focuses on domestic M&A instead, in order to assess the role of proximities within a more homogeneous national context. There are a number of studies on domestic M&A deals in Germany (Grote andUmber, 2006), Finland (Böckermann andLetho, 2006), the Netherlands (Ellwanger and Boschma, 2013) and the US chemical industry (Chakrabarti and Mitchell, 2013) that have generated valuable insights, especially on the role of geographical proximity. However, these studies on domestic M&A have accounted only for one or two proximities, and therefore, lack a comprehensive proximity framework as proposed by Boschma (2005).…”

“…Ragozzino, 2009;Ellwanger and Boschma, 2013). In M&A partnering, information is crucial not only for the identification of potential partners but also for the success of the due diligence process (Chakrabarti and Mitchell, 2013).…”

“…Ahuja and Katila, 2001;Schildt and Laamanen, 2006;Hussinger, 2010;Ellwanger and Boschma, 2013). The main reason to acquire a company from the same or a similar industry is the possibility to realize synergy effects.…”

“…There exists quite a number of studies on the determinants of M&A partnering that either implicitly or explicitly follow a proximity framework (e.g. Rodríguez-Pose and Zademach, 2003;Böckerman and Letho, 2006;Eun and Mukherjee, 2006;Grote and Umber, 2006;Schildt and Laamanen, 2006;Chakrabarti and Mitchell, 2013;Ragozzino, 2009;Di Guardo et al, 2013;Ellwanger and Boschma, 2013). We aim to make two contributions to this literature.…”