Customer concentration of targets in mergers and acquisitions

Mei Cheng; Jacob Jaggi; Spencer Young

doi:10.1111/jbfa.12587

Customer concentration of targets in mergers and acquisitions

Mei Cheng, Jacob Jaggi, Spencer Young

Research output: Contribution to journal › Article › peer-review

Abstract

We study how the customer concentration of targets impacts the occurrence and structure of mergers and acquisitions (M&A). We hypothesize and find that acquirers respond to customer concentration-related risk by placing fewer bids for targets with greater customer concentration and by using more stock payment in their offers. These relations vary predictably with major customer-related uncertainty. Our findings extend the literature by documenting an important risk factor in M&A and by quantifying the economic consequences of customer concentration.

Original language	English (US)
Journal	Journal of Business Finance and Accounting
DOIs	https://doi.org/10.1111/jbfa.12587
State	Accepted/In press - 2021
Externally published	Yes

ASJC Scopus subject areas

Accounting
Business, Management and Accounting (miscellaneous)
Finance

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10.1111/jbfa.12587

Cite this

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title = "Customer concentration of targets in mergers and acquisitions",

abstract = "We study how the customer concentration of targets impacts the occurrence and structure of mergers and acquisitions (M&A). We hypothesize and find that acquirers respond to customer concentration-related risk by placing fewer bids for targets with greater customer concentration and by using more stock payment in their offers. These relations vary predictably with major customer-related uncertainty. Our findings extend the literature by documenting an important risk factor in M&A and by quantifying the economic consequences of customer concentration.",

author = "Mei Cheng and Jacob Jaggi and Spencer Young",

note = "Funding Information: We thank Michael Ettredge, Scott Judd, Aaron Nelson, Ayung Tseng, Dan Wangerin and conference participants at the 2018 ASU‐UA Accounting Research Conference, the 2018 BYU Accounting Research Symposium, the 2019 Hawaii Accounting Research Conference and the 2019 AAA Annual Meeting for helpful comments and suggestions. We thank The University of Arizona for financial support. (Paper received February 2021, revised version accepted December 2021). Publisher Copyright: {\textcopyright} 2021 John Wiley & Sons Ltd",

year = "2021",

doi = "10.1111/jbfa.12587",

language = "English (US)",

journal = "Journal of Business Finance and Accounting",

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AU - Jaggi, Jacob

AU - Young, Spencer

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PY - 2021

Y1 - 2021

N2 - We study how the customer concentration of targets impacts the occurrence and structure of mergers and acquisitions (M&A). We hypothesize and find that acquirers respond to customer concentration-related risk by placing fewer bids for targets with greater customer concentration and by using more stock payment in their offers. These relations vary predictably with major customer-related uncertainty. Our findings extend the literature by documenting an important risk factor in M&A and by quantifying the economic consequences of customer concentration.

AB - We study how the customer concentration of targets impacts the occurrence and structure of mergers and acquisitions (M&A). We hypothesize and find that acquirers respond to customer concentration-related risk by placing fewer bids for targets with greater customer concentration and by using more stock payment in their offers. These relations vary predictably with major customer-related uncertainty. Our findings extend the literature by documenting an important risk factor in M&A and by quantifying the economic consequences of customer concentration.

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Customer concentration of targets in mergers and acquisitions

Abstract

ASJC Scopus subject areas

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