Our recent study published in the Journal of Business Research sheds new light on how CEO experience impacts merger and acquisition (M&A) deal completion. Here are the key takeaways for executives and managers:

1. CEO Experience Matters: 

The study found that acquiring CEOs with more M&A experience are more likely to complete deals. This experience can come from their current or previous roles.

2. Two Types of Experience:

• Experience Depth: The number of previous acquisitions a CEO has been involved in.
• Experience Breadth: The diversity of acquisition types (e.g., domestic, cross-border, friendly, hostile) a CEO has handled.

Both depth and breadth of experience positively impact deal completion rates.

3. Target CEO Experience Can Complicate Deals:

Interestingly, when target company CEOs also have significant M&A experience, it can actually reduce the likelihood of deal completion. This is especially true when both CEOs have high levels of experience.

4. Role Expectations Matter:

The study suggests that conflicts can arise when experienced target CEOs struggle to shift from their usual leadership role to a more subordinate position in the acquisition process.

5. Practical Implications:

• For acquiring companies: Consider your CEO's M&A experience when pursuing deals. If your CEO lacks experience, additional support or training may be beneficial.
• When acquiring: Be aware of the target CEO's experience level. Deals with experienced target CEOs may require more careful management and negotiation.
• For boards: CEO M&A experience should be a consideration in hiring decisions, especially for companies with active M&A strategies.

6. The Numbers:

• On average, each additional acquisition in a CEO's background increases the likelihood of deal completion by about 9%.
• Greater diversity in a CEO's acquisition experience increases deal completion likelihood by about 214%.

In conclusion, while CEO experience generally helps in completing M&A deals, the dynamics change when both parties have highly experienced leaders. Understanding these nuances can help executives better navigate the complex world of M&As.

Reference:

Bhussar, M. S., Zorn, M., Adams, G. L., & Silvera, G. (Accepted). Tug of War: The Role of Acquirer And Target CEO-Level Acquisition Experience in Deal Completion. Journal of Business Research.