Research On The Realization Of M&A Motivation And Mechanism Based On Network Synergy

In recent years,M&A activities have become increasingly frequent all around the world,and M&A have become an important strategy for the external development of companies,which determines the future development direction of companies as well as the wealth and value of shareholders.The increasingly active M&A activities are accompanied by the “high failure rate”.This paradox has become a scientific question at the forefront of M&A(Renneboog & Vansteenkiste,2019).Therefore,how to correctly evaluate the performance of M&A has also become an important topic widely concerned by the academia.Up to now,the methods of comparing the accumulated abnormal returns of stocks,long-term shareholder value and changes in financial indicators before and after M&A are the main methods for evaluating M&A performance.However,these methods may ignore the “original intention” of M&A motivation and then draw incomplete conclusions.Clear M&A motivations are the key to optimize the allocation of internal and external resources and achieve the goals of M&A,so the evaluation of M&A performance should be based on the realization of M&A motivation.Some scholars have tried to evaluate M&A performance from the perspective of M&A motivation,but when measuring M&A performance,they did not combine various motives to evaluate,or they just use questionnaires,index evaluation or other empowerment methods to evaluate M&A motivation,which cannot truly reflect M&A performance.The deepening of market economy makes the network characteristic of companies more obvious and the competition among companies has evolved into the competition among companies’ networks.The companies’ economic network is a complex system composed of companies’ internal economic network and the inter-company economic network embedded by companies based on the control relationship.The development of M&A activities can change the structure and composition of the companies’ economic network before and after M&A.By combining the respective nodes of the acquirer and the target,M&A can significantly reshape the inter-organizational network,with the acquirer gaining control of the nodes of the target and creating a more favorable structure for the merged company,thus creating synergies(Hernandez & Shaver,2019).Therefore,the sources of synergistic effect of M&A not only contain economies of scale,economies of scope and transaction cost savings,but also contains economies of network,and economies of network is the most important source of synergistic effect of M&A.In recent years,Phenomenons of alliance instability,companies frequently suffering from goodwill collapse and high M&A premium without expected performance are actually caused by lack of understanding of M&A economic characteristics and unclear guidance of economies of network in theory and in application.The existing research of companies’ economic network and the M&A mainly concentrated on the network composed of political connections,executives,directors,shareholders and innovation and how the position of the acquiring firm in the network,can promote M&A decision and improve M&A performance.However,these network mainly focused on the inter-company network and neglected companies’ inter network,but intra-company network attributes often represent the ability to use inter-company network,which can not accurately reflect companies’ economic network.Also there are few studies focusing on the synergistic effect of economies of network from the perspective of network change before and after M&A.In addition,there is a lack of discussion on the realization of M&A motivation from the perspective of influence mechanism.This research builds the theoretical system of realization and influence mechanism based on network synergy,sets up the econometric model consisting of economies of network,economies of scale,economies of scope transaction cost saving,economies of network and M&A motivation realization.Based on 2201 M&A events from 2007 to2019,this paper constructs the intra-company equity network composed by listed companies and their subsidiaries and the inter-company product network composed by listed companies and other listed companies.By using the analysis method of complex network,this paper empirically tests the influence of economies of network generated by M&A on the realization of M&A motivation and the influencing mechanism.The following conclusions are drawn:(1)As the merger and remodeling of two economic networks,M&A can lead to changes in nodes’ degree and strength of internal and external networks.The greater the change is,the more conducive the realization of companies’ M&A motivation is.Specifically,the promotion effect of internal network is obviously higher than that of external network.(2)In companies’ internal network,the economies of scale has a significant mediating effect on the relationship between economies of network generated by companies’ internal network and the realization of M&A motivation.In companies’ internal network,the change of nodes’ strength can significantly promote economies of scale,and the greater the change is,the greater economies of scale is,but the mediating effect is not significant.(3)In companies’ internal network,the change of companies’ node degree can significantly promote the economies of scope measured by the change of number of industries,while the change of companies’ node degree and strengh can significantly promote the economies of scope measured by the change of income entropy index and the Hefendel index,but the mediating effect is not significant.In the external network,the change of companies’ node degree can significantly promote the economies of scope measured by the change of number of industries,income entropy index and Hefindel index,but the mediating effect is not significant.(4)In companies’ internal network,the change of companies’ node degree and strengh can significantly promote transaction cost saving,but the mediating effect is not significant.While in the external network,the change of companies’ node degree can significantly promote transaction cost saving,but the mediating effect is not significant.Our research provides a new research perspective.Our research reasonably and specifically explains the paradox that increasingly active M&A activities are accompanied by the “high failure rate”.Secondly,this study provides new research evidence.Starting from the changes in nodes’ degree and strengh of the internal and external network,we construct the ownership network of the internal listed companies and their subsidiaries,and the product network of the external listed companies and other companies.Finally,this study enriches the research on factors influencing the realization degree of M&A motivation,introduces companies’ economic network and economies of network generated by M&A,and discusses the realization degree of M &A motivation from the mechanism by combining economies of scale,economies of scope and transaction cost saving.Our research is conducive to guiding the behavioral rationality of companies’ M&A,and is beneficial for the regulatory authorities to further standardize the M&A behavior of listed companies.At the same time,our research can contribute to the formation of modern industrial system and the high-quality development of China’s economy.In addition,our research will also contribute to the comprehensive and sustainable development of macro economic networks including the Europe and Asia “Connectivity Strategy” as well as the internal restructuring activities of business groups.