M&A under uncertainty

Abstract

This paper is a study that empirically examines the antecedents of M&A from the perspective of business environment uncertainty. M&A is considered to be a corporate action aimed at quickly responding to environmental uncertainty. Although there is a large amount of prior research, further research is needed on Japanese companies to see what kind of M&A is being implemented as a strategy to respond to environmental uncertainty. In the practice of corporate strategy and industrial policy, the effective use of M&A between companies with different business contents and scales has become an urgent issue. The research question of this study was set as "How does environmental uncertainty affect the execution frequency, diversification, and project size of M&A?" The analysis results suggested that, when using a sample of M&A deals announced between 2004 and 2018 in which Japanese companies were the buyers, there is a tendency for small-scale M&As to be carried out more actively when uncertainty in the industry environment in which the M&A buyer company belongs increases. This study's contribution is that it adds new empirical study from the perspective of what types of M&As are carried out in uncertain environments. Based on lean startup theory, when uncertainty is high, the speed of responding to change is emphasized, and it can be assumed that a causal relationship will lead to light and simple investment behavior taking precedence.