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The Impact of Technology and COVID-19 on Mergers and Acquisitions: Implications for Supply Chain Management
Abstract
This paper explores the issue of MA as it pertains to Supply chain elements such as Enterprise Resource Planning (ERP), the role of technology, and supply chain efficiency. By exploring the issue further, the research seeks to assess the recent trend of increased mergers and acquisitions (MA) and how the activities affect the supply chain management (SCM) role. The results are important in understanding current trends in SCM when it comes to mergers and acquisitions. The discussion covered the role that COVID-19 played in increased trends in MA and technology's role in MA activities and success. The ultimate goal is to understand how technology and COVID-19 impact MA activities and how, in turn, the supply chain management role gets affected.
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Innovation is the source of competitive advantage for enterprises. In the context of global industrial upgrading and increasingly fierce technological competition, enhancing innovation capabilities is key to enterprises’ success. Technology mergers and acquisitions have become an important way for enterprises to acquire external technology, to enhance their innovation capabilities, and to achieve rapid development. Many scholars have extensively researched technology mergers and acquisitions and enterprise innovation. This paper summarizes the relevant research literature according to different research contents. The research content includes the motivation for technology mergers and acquisitions, analyzing the impact mechanism and the path of technology mergers and acquisitions regarding enterprise innovation from the perspectives of technology relevance, the technology absorption capacity, the institutional environment, and corporate governance, as well as related research on the consequences of technology mergers and acquisitions for enterprise innovation and measuring methods for technology mergers and acquisitions and enterprise innovation. This paper summarizes and organizes the relevant literature, aiming to find research directions and enrich future research fields by summarizing it. This effort provides important theoretical support for the strategic decision-making of enterprise technology mergers and acquisitions under the guidance of innovation, and it also provides a reference for further optimizing the innovation incentive environment.
The cross-border movement of capital has suffered due to the COVID-19 pandemic since December 2019. Nevertheless, it is unrealistic for multinational companies to withdraw giant global value chains (GVCs) overnight because of the pandemic. Instead, active discussions and achievements of deals in cross-border mergers and acquisitions (M&As) are expected in the post-COVID-19 era among various other market entry modes, considering the growing demand in high technologies in societies. This paper analyzes particular determinants of cross-border mergers and acquisitions (M&As) during the pandemic year (2020) based on cross-sectional datasets by employing quasi-Poisson and negative binomial regression models. According to the empirical evidence, COVID-19 indices do not hamper M&A deals in general. This indicates that managerial capabilities of the coronavirus, not the outbreak itself, determined locational decisions of M&A deals during the pandemic. In this vein, it is expected that the vaccination rate will become a key factor of locational decision for M&A deals in the near future. Furthermore, countries that have been outstanding in coping with COVID-19 and thus serve as a good example for other nations may seize more opportunities to take a leap forward. In addition, as hypothesized, the results present positive and significant associations with M&A deals and the SDG index, confirming the resource-based theory of internationalization. In particular, the achievement of SDGs seems to exercise much influence in developing countries for M&A bidders during the pandemic year. This indicates that the pandemic demands a new zeitgeist that pursues growth while resolving existing but disregarded environmental issues and cherishes humanitarian values, for all countries, non-exceptionally, standing at the start line of the post-COVID-19 era.
Most economic downturns have stemmed from inefficiencies in the economic system. This research paper aims at investigating the impact of the COVID-19 pandemic—an exogeneous health crisis—on global mergers and acquisition (M&A) activity. By gathering statistical data about global transaction volume, value, and type, the study aims at getting a pulse of how mergers, acquisitions, and other restructuring activities have been utilized to support corporate objectives amidst these unprecedented times. While the full-fledged impact of COVID-19 cannot be fully captured at the moment (early 2021), the study attempts to illustrate how this change to economic stability caused a Schumpeterian creative destruction of industries. As firms prepare for the growth that will follow this downturn, M&A will enable companies to look into a future infused with technology and structurally different business models. This research paper thus captures the deliberate transformation occurring in the deal world to discuss the possible outlook of the M&A deal market in the post-pandemic world.
A large body of academic research has recently focused on omnichannel retailing especially on brick-and-mortar (offline) retailers adding and integrating online capabilities. Relatedly, trade press has highlighted how offline retailers have been investing heavily in the use of their existing physical retail network for quicker delivery and pick-up of online orders. Looking at the competition between Amazon and Walmart, however, we demonstrate that focusing on quicker delivery is not the best strategy for offline retailers when opening online channels to compete with online retailers. We estimate a multivariate probit model using data from a customer survey and find that offline retailers should instead focus on delivering the fundamentals of retailing to their online customers too - larger assortment, competitive prices, and purchase convenience. Further, we employ cluster analysis to show which demographics are good targets for retailers as they develop omnichannel capabilities, as well as which demographics retailers need to keep loyal to their original channels.
Should there be limits on startup acquisitions by dominant firms? Efficiency requires that startups sell their technology to the right incumbents, that they develop the right technology, and that they invest the right amount in R&D. In a model of differentiated oligopoly, we show distortions along all three margins if there are no limits on startup acquisition. Leading incumbents make acquisitions partially to keep lagging incumbents from catching up technologically. When startups can choose what kind of technology they invent, they are biased toward inventions that improve the leader’s technology rather than those that help the laggard incumbent catch up. Further, upon obtaining a pure monopoly, the leading incumbent’s marginal willingness to pay for new technologies falls abruptly, which diminishes private returns on future innovations. We consider antitrust measures that could mitigate these problems.
Mergers and acquisitions (M&As) by first‐tier suppliers, referred to as the supply base, are dynamic and drastic changes in supply chain structure and relationships that affect focal firm performance. In particular, the impact of M&As in a supply base depends on the concentration and differentiation of the supply base, which affects power‐dependence relationships in the supply chain. This study examines the effect of supply base M&As on focal firms’ cost of goods sold (COGS). In addition, this study explores the role of power relationships by investigating the moderating effects of supply base concentration and differentiation. Using secondary panel data assembled from four different data sources, this study constructs econometric models and empirically examines the relationship between supply base M&As and focal firm cost efficiency. Our findings indicate that supply base M&As are positively associated with focal firm COGS. This result suggests that potential efficiency gains from M&As in supply bases may not translate to benefits for the focal firm because suppliers may also gain bargaining power from M&As. However, the effect of supply base M&As on focal firm COGS is attenuated when the supply base is less concentrated in terms of their transaction percentage with suppliers and more differentiated in terms of industry and business scopes. These are situations where suppliers less effectively obtain or employ bargaining power from M&As. These findings make important contributions to the operations management literature. This article is protected by copyright. All rights reserved
Purpose
The purpose of this study is to investigate the relationship between environmental, social and governance (ESG) performance and shareholder wealth in the context of mergers and acquisitions (M&As) before and during the coronavirus (COVID-19) pandemic.
Design/methodology/approach
This paper uses a sample of 889 completed M&As announced by US firms between 1 January 2018 and 31 July 2020. Announcement abnormal returns are estimated using an event study methodology and the relation of ESG performance to shareholder value creation is tested with univariate and multivariate cross-sectional regressions.
Findings
This study provides evidence for a significant negative value effect of ESG performance for the shareholders of acquiring firms during the entire sample period. The negative effect appears to be stronger, as the onset of the COVID-19 crisis. This suggests that, during the pandemic-driven economic turmoil, the costs of sustainability activities outweigh any possible gains, providing evidence in support of the overinvestment hypothesis.
Research limitations/implications
The results of the study have important implications for firms, investors and policymakers. Firms should be more cautious with regard to extensive investments in ESG activities, particularly during economic turmoil. For shareholders, the results suggest that ESG engagement is not a resilience factor in an exogenous shock such as the COVID-19 pandemic. In terms of policymaking, the sustainability disclosure framework should remain voluntary allowing firms to report material ESG-related issues. The main limitation of the study is related to data availability regarding ESG performance.
Originality/value
To the best of the knowledge, this is the first study that investigates the effect of ESG performance on shareholder value in the market for corporate control before and during the COVID-19 pandemic.
We empirically examine horizontal mergers amongst Part D insurers with the aim of assessing how market power, cost efficiencies, and bargaining power affect premiums and coverage characteristics, including drug access and out-of-pocket (OOP) cost. Our results reveal that market power raises premiums, but this is only a local effect that occurs in markets where the merging firms overlap. Mergers alter the bargaining process with upstream suppliers at both local and national levels, affecting drug access and OOP cost. We find evidence of cost efficiencies when firms restructure by consolidating their plan offerings.
Accumulating evidence points to the need for more vigorous antitrust enforcement in the United States in three areas. First, stricter merger control is warranted in an economy where large, highly efficient and profitable “superstar” firms account for an increasing share of economic activity. Evidence from merger retrospectives further supports the conclusion that stricter merger control is needed. Second, greater vigilance is needed to prevent dominant firms, including the tech titans, from engaging in exclusionary conduct. The systematic shrinking of the scope of the Sherman Act by the Supreme Court over the past 40 years may make this difficult. Third, greater antitrust scrutiny should be given to the monopsony power of employers in labor markets.
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