Authors: Bowon Kim; Jaeseok Na; Sunghak Kim
Addresses: KAIST Business School, 85 Hoegiro, Dongdaemun-gu, 02455, Seoul, Korea ' KAIST Business School, 85 Hoegiro, Dongdaemun-gu, 02455, Seoul, Korea ' KAIST Business School, 85 Hoegiro, Dongdaemun-gu, 02455, Seoul, Korea
Abstract: Firms use merger and acquisition (M&A) as a strategic tool to restructure their business. We explore the factors that determine the success of M&A in manufacturing. The literature has highlighted financial variables as success factors. However the literatures have not considered how operational factors of target firm have effects on the post-M&A performance of the buyer firm. Thus, we hypothesise that operational factors of the target firm also affect the M&A performance. In particular, we look into three different types of inventory, i.e., raw material, work-in-process, and finished goods, simultaneously. Then, we put forth that the turnover of the target firm's work-in-process inventory, which directly reflects its operational efficiency, is the most important factor. Thus, we conclude that in addition to financial factors, the target firm's operational efficiency determines the M&A performance. We elaborate on the analysis results and discuss economic as well as managerial implications.
Keywords: work-in-process inventory; merger and acquisition; M&A; return on assets; ROA; inventory turnover; target firm; post-merger and acquisition performance.
International Journal of Applied Management Science, 2018 Vol.10 No.3, pp.173 - 191
Accepted: 03 Aug 2017
Published online: 26 Jul 2018 *