Connections versus Expertise of Legal Advisors, and Acquirers’ Failure to Learn: Academy of Management Proceedings

Drawing on theories of social networks and organizational learning, we theorize about the importance that acquirers attribute to network-related and expertise-related factors in selecting legal advisors in international M&As. We also assess the outcome implications of these network-related and expertise-related factors with respect to two under-explored variables in cross-border acquisition processes: completion likelihood and duration of the public takeover phase. Finally, we investigate whether acquirers learn to rebalance the weights attached to these criteria with increasing M&A experience. An analysis of 12,249 acquisition attempts in the time period 1998–2010 where the acquirer and the target come from a country in one of the regions North America, Western Europe, or East Asia strongly supports our theory. General and country-specific expertise of legal advisors are key drivers of completion likelihood and time to completion, but receive relatively little weight as selection criteria. Network embeddedness, in turn, drives acquirers’ selection of legal advisors but has comparatively little, and not unambiguously positive influence on pre-completion performance. Further, we find little evidence of organizational learning in terms of acquirers adapting their selection criteria with increasing M&A experience to improve alignment between drivers of selection and pre-completion outcomes.