Does a Prior Alliance with the Target Affect Acquisition Performance? The Dangers of a Honeymoon before Marriage

Drawing from organizational learning theory, extant literature argues that a pre-acquisition alliance between an acquirer and its target is usually expected to have a positive impact on subsequent acquisition performance. Yet, since alliances and acquisitions are partially dissimilar events, negative transfer effects can bias inter-partner learning and negatively affect acquisition performance. To fill this gap, our paper explores pre-acquisition alliance duration and examines its effects on acquisition outcomes. We argue that a pre-acquisition alliance can have either beneficial or detrimental effects on subsequent acquisition performance, depending on the duration of the pre-acquisition alliance. We examine our hypotheses using a (1988-2008) panel database covering acquisitions by French firms in the US. We show an inverted U-shaped relationship between the duration of a pre-acquisition alliance and the probability of acquisition failure. Our results also indicate that this non-monotonic relationship is partially moderated by the degree of partner commitment to the alliance.