Determinants of deal duration in mergers and acquisitions: are they the same for private and public targets?

Analyzing the M&A process is crucial to grasp the drivers behind M&A success (Haspeslagh & Jemison, 1991). We, therefore, decide to investigate the deal duration or in others words the time interval between the M&A public announcement and its completion. Until now it has been mostly kept out of academics’ agendas. A few papers discussed the drivers of deal duration, but none of them investigated antecedents of private targets exclusively. However, knowing which drivers influence deal duration of public companies acquiring private target is crucial because more than 60% of M&As executed involve the purchase of a private firm (Capron & Shen, 2007). Limiting the deal duration by being aware of its determinants can benefit the acquirer in several ways. First, it involves fewer costs. This is essential as deal expenditures can rise to six percent of the M&A value (Ferreira, Borini, Vicente & Almeida, 2017). Second the acquirer can focus faster on its daily operations. This can prevent that the company misses out on future business opportunities. Lastly, competitors are kept out of the game due to the short time allowed to react. Moreover, shareholders benefit faster from the M&A advantages (synergies, market power, etc.). The goal of this paper is, thus, first to identify the determinants of deal duration for public companies acquiring private targets. In the next phase these determinants are compared to the drivers of public targets to identify similitudes and differences. The determinants being investigated in this paper are the following: deal complexity, information asymmetry, likelihood of overpaying, and prior M&A experience. . The main findings are the following: (1) acquirers should pay attention to similar determinants as public targets when acquiring a private target (i.e. deal complexity & likelihood of overpaying), (2) information asymmetry does not have an impact on deal duration except if the target is a small-sized public company, (3) and prior M&A experience speeds up deal completion when it invovles the acquisition of a private target. Despite the important insights delivered by this paper a few limitations have to be mentioned. First the findings are based on the M&As reported in the database. The Thomson One Banker database includes an enormous number of M&As but it still lacks information on certain transactions. Second our investigation is limited due to the large set of data. It restricts our ability to investigate more specific issues like industry effects. Lastly, the comparison of the determinants reflecting deal complexity between private and public targets is limited to a certain degree. We assume the impact is similar on deal duration but it has to be confirmed by further studies. Additional proxies could be taken into consideration (for example: resistance of the target management). Further research could try to find out why information asymmetry does not affect deal duration. Academics should also investigate the impact of prior M&A experience on deal duration, as contradicting results were obtained.