Are things getting better with an executive specialist? The case of M&A

Abstract

This paper investigates the impact on deal outcomes of the presence of M&A top executives with a job title related to external growth. Using a sample of 10,818 US deals between 1993 and 2019, our results show that such presence is negatively associated with bidder gains. These bidders also experience lower post-acquisition operating performance, as well as lower investment efficiency. This negative effect is associated with a change in firms acquisition strategy. More specifically, we find evidence that the presence of M&A top executives reduces the propensity to acquire tech targets and to differentiate the firm from existing competitors. We also find that this institutionalization of the M&A function occurs mainly in mature companies. Taken together, these results suggest that M&A top executives are appointed in companies at a mature stage of their life cycle, when the need for innovation and differentiation is less pronounced, resulting in deals that create less value.