Dissertation: Entering foreign markets without optimal acquisition strategy can be costly
Oguji’s study utilizes eight case studies of Finnish multinationals (MNE) involving 26 acquisitions in advanced, emerging and developing countries.
He says it is important for Finnish MNEs to opt for the optimal acquisition strategy at the time of market entry.
– Not opting for the optimal strategy impacts negatively synergy realization such as paying a high premium on the acquisition purchase price at later time and the loss of management resources if the MNE opted for partial or staged acquisition instead of full acquisition, says Oguji who will defend his dissertation at the University of Vaasa.
If the company doesn’t choose an optimal acquisition strategy, it can lead to the loss of integration synergies in partially acquired subsidiaries that would have been attained if the acquisition was a full acquisition.
– Finally, not opting for the optimal acquisition strategy leads to failed acquisitions or divestment and an additional cost for the organization, Oguji says.
Exploitative motives are utilized for full acquisitions
The study finds that host country institutional environment, the motives of acquisition, target-specific experience and host country capability influence Finnish MNEs choice for partial, staged and full acquisition.
The research also found two types of strategic-asset seeking acquisitions, one that is exploitative and the other is explorative. While explorative motives are utilized for partial acquisitions, exploitative motives are utilized for full acquisitions.
Partial acquisitions are more utilized in host countries with regulatory restrictions. Staged acquisition is used when acquisition involves stock trade or when the MNEs do not possess either host country capability or target-specific experience.
Full acquisitions are often utilized when the acquiring MNE possesses host country capability, target-specific experience and when the target is a competitor or a relatively small company.
Oguji says that gaining of host country capability and relieving institutional restrictions by host countries was found to influence increase in equity stake in partially acquired subsidiaries.
The public examination of M.Sc. Nnamdi Oguji’s doctoral dissertation ”Foreign acquisition entry strategies and performance of Finnish multinationals: The role of entry motives, institutions and host country capabilities” will be examined on Thursday 24th September at 14 o´clock in auditorium Nissi (Tritonia), University of Vaasa.
Associate professor Svetla Marinova (Aalborg University) will act as opponent and professor Jorma Larimo as a custos.
Further information: Nnamdi Oguji, tel. +358 44 996 6229, e-mail: noguji(at)uwasa.fi