Dynamic capabilities as antecedents of value creation through mergers and acquisitions

Abstract

With a growing interest in mergers and acquisitions to support corporate growth ambitions, researchers and business practitioners remain concerned as a high ratio of transactions lead to corporate value erosion. Priori literature has confirmed firm capabilities as antecedents to merger and acquisition transactions, a dyadic relationship between dynamic capabilities and these transactions, and that dynamic capabilities lead to competitive advantage and profit. However, literature suggests that existing developed market frameworks and priori acquisition research do not apply to emerging market economies; thus, this research context was set within a South African firm. The research setting addressed further academic gaps on the limited practical application of dynamic capabilities research. This research explored how dynamic capabilities impact acquisition decision-making to create and capture value. It does so at the hand of a within-case and cross-case analysis of two qualitative case studies of previous acquisition transactions of a South African multination firm. Research findings contribute to dynamic capabilities, by suggesting how acquisition experience develops dynamic capabilities, and how value is created within acquisitions, by utilising dynamic capabilities in decision-making. Furthermore, findings propose that value capture to shareholders improves when decisions are aligned to strategy, offering a business recommendation to improve chances of acquisition success