Do Opposites Attract? The Uncertainty Spread as a Predictor of Diversification Mergers and Acquisitions

If uncertainty in the core business drives diversification, then diversification should occur more often when the target industry has low uncertainty. Adopting an industry-dyad view of diversification, we investigate whether uncertainty spread, the difference in uncertainty levels between acquirer and target industries, is related to diversification moves. Using information processing arguments along with Quadratic Assignment Procedure in conjunction with logistic regression, we observe results suggesting that the greater the uncertainty spread between acquirer and target industries, the higher the likelihood of diversification M&A between them, with diversification strategy moderating this relationship