Why Do Some Merger and Acquisitions Deals Fail? A Global Perspective

We analyze why some merger and acquisitions (M&A) deals are withdrawn paying particular attention to the economic freedom and legal environment of countries. We use a large dataset based on deals worldwide from over 140 countries during the period 1977 to 2014. Our core finding is that the likelihood of a deal's withdrawal tends to increase if the economic freedom/ quality of legal environment of the acquiring (target) firm's country is higher (lower). These core findings matter more for the non-financial sector, during non-crisis years, and in developed financial markets. We also report that the deals have higher tendency to be withdrawn if the target firm's size is larger or its profitability is lower; and the acquiring firm's size is smaller. Furthermore, our analyses reveal that deal characteristics (i.e., deal attitude, means of payment, deal size, ownership sought) also matter in affecting the outcome of announced M&A deals