What shapes cross-border merger and acquisition negotiations in the automotive industry?
Rana, Yadvinder S.
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The research evaluated the impact of contextual, structural, and behavioural factors in shaping cross-border merger and acquisition (CBMA) negotiations between automobile manufacturers. Recent years have seen an increase in CBMA activity in the automotive industry, advanced by the necessity to share investments in alternative power sources for engines and realise economies of scale and scope. The significance of the topic is reflected by the essential role played by the automotive industry in the global economy. According to Fortune (2020), the combined revenue of the top 10 automakers exceeded $1.70 trillion in 2019. PricewaterhouseCoopers (2020) reported that Global Automotive M&A activity accounted for $100 billion and approximately 800 deals in 2018, and over $77 billion and around 850 deals in 2019. Despite the substantial deal value and volume, research has repeatedly determined that over 70 per cent of CBMAs fail to deliver the promised results due to the ineffective management of the negotiation process. Moreover, while the different stages of the M&A process have been extensively investigated, research on the M&A negotiation phase has been limited, and very few studies have attempted to incorporate contextual, structural, and behavioural factors in analysing inherently complex CBMA negotiations. The study followed a pragmatist standpoint and adopted a sequential mixed-method design integrating the macro-strategic and micro-behavioural levels of analysis. The first phase based on a qualitative small-N focused comparative analysis case study on identifying the type of precipitant originating turning points in CBMA negotiations between automobile manufacturers. The second quantitative phase entailed a factorial experimental design and questionnaires to evaluate motivational and relational factors' role in shaping the negotiators' response to the previously identified precipitants. The simulations extensively conformed to a real case, and the sample of experimental participants consisted of executives with at least seven years of negotiation experience. The findings indicate that negotiation outcomes are significantly influenced by elements internal to the negotiation process, with contextual factors (including culture) exhibiting only a marginal influence. The conclusions also highlight the critical role of coalition-building in shaping the negotiation process. The results supplement current literature and provide a roadmap for managers to better prepare, identifying the three crucial behavioural factors that shape negotiators' response to precipitants and significantly influence the outcome of CBMA negotiations between automobile manufacturers: the seller's motivation and power perception and the buyer's affective trust.