Paper info

Are mergers and acquisitions contagious?- Conceptualising parallel M&As among customers and suppliers

Christina Öberg and Johan Holtstrom

The paper was published at the 21st IMP-conference in Rotterdam, Netherlands in 2005.

Mapping the number of completed mergers and acquisitions (M&As) over the past few decades wouldproduce a line roughly following the fluctuations of the business cycle. The most recent peak wasmarked by the numerous M&As occurring in the late 1990s and in early 2000 (Bengtsson and Skärvad2001; Weston and Weaver 2001), followed by the recession starting in late 2000 (Sevenius 2003;Lundell 2002; KPMG Corporate Finance 2003; Förvärv & fusioner 2004). Weston and Weaver (2001)describe this development as M&A waves, and refer to the most recent peak of mergers andacquisitions as the fifth M&A wave. Different peaks in the history of M&A have had different foci. In the1960s and 1970s, diversification and the creation of conglomerates were common reasons formerging with or acquiring other companies (Shleifer & Vishny, in Rumelt, Schendel and Teece 1994;Weston and Weaver 2001). In the age of economic globalisation, the M&As of the late 1990s andearly 2000 were more international in scope, involving companies from more than one country; theywere also more focused on bringing intra-industry companies together (Bengtsson and Skärvad 2001;Sevenius 2003). The intra-industry focus on M&As could stand as a description for the concentrationin e.g. the automotive industry and the IT-sector in the late 1990s. But is this all we see?This paper focuses on M&As as a driving force for other M&As. More specifically, our focus is on howM&As among customers lead to M&As among suppliers, and reverse, in a network perspective. Welaunch the concept of parallel M&As to describe this phenomenon. The purpose of this paper is todiscuss parallel M&As, asking: In what ways are M&As among customers and suppliers a driving forcefor M&As? In contrast to the argument in e.g. Halinen, Salmi and Havila (1999) and Havila and Salmi(2000), we argue that M&As are not only a trigger to change, but also a response to change, andfurther, that these changes need not be directly dyadically connected (cf. Hertz 1998; Havila andSalmi 2000), but appear parallel to each other. Contrary to the motives presented in most traditionalM&A literature, this further means challenging M&As as only being the result of strategies within theacquiring company. Instead we point at M&As as contextually driven. Built on the six case studies,matching, dependence and keeping a “power balance” between customers and suppliers are referredto as key explanations for parallel M&As.