The impact of organisational and managerial acquisition experience on M&A performance

This study examines the influence of acquisition experience of Australian publicly listed acquirers and that of their top management team (TMT) on the performance (measured as stock market reaction around the acquisition announcement) of mergers and acquisitions completed during the period 2006-2012. We draw on the psychological literature on groups effectiveness in complex decisions making to develop a theoretical framework to complement the traditional organisational learning theory used in the research on acquisition experience. We use this literature to argue that firms will make higher quality acquisition decisions that will result in better acquisition performance to the extent that their TMT has experience with, and resulting knowledge in, acquisition decision making. The results support our prediction, while finding that organisational acquisition experience, on its own, does not influence the acquisition performance. Also, drawing on additional insights from psychological research on the hubris hypothesis in the case of corporate takeovers (Roll, 1986), this paper predicts and finds that the interaction between organisational and TMT acquisition experience has a positive impact on acquisition performance. Overall, the paper extends the acquisition experience literature and explains the inconclusive results obtained in prior studies that focused on organisational learning theory and neglected the managerial acquisition experience