Diss. Stockholm : Handelshögskolan

This doctoral thesis investigates the evolution of trust in investment bank(er)-client relationship in mergers and acquisitions by focusing on deals over EUR 1 billion. As sub-areas of research interest, this work explores the reasons responsible for the decline of trust in the research context, and also enquires if trust can be regained. The author’s findings indicate that the investment bank(er)-client relationship cannot exist without trust. The bank(er)-client relationship begins with Performance trust in the introductory phase, evolves to a stronger Experiential Performance trust in the second phase, and reaches at its zenith in the third phase i.e. the last phase of trust evolution. The third phase is quintessentially marked by a situation in which a client is left with the choice of choosing either the investment banker or the bank. The former concludes the evolution of trust in form of Superior Interpersonal trust, while the latter marks the end of the phenomenon with Superior Company trust. Scams, dishonesty and irresponsible behaviour, lack of transparency predictability and performance, can result in termination of trust. The authors’ findings suggest that regaining trust is possible at an organisational level, but not at an interpersonal level.:Chapter I: Introduction Chapter II: The background and motivation 2.1 Trust in investment banks: An overview of the present scenario 2.2 The M&A business, investment banker-client relationship, and trust 2.3 The theoretical view on the research gap, and research questions Chapter III: Literature review 3.1 Defining trust as a concept 3.2 A platform to comprehend the phenomenon of trust 3.2.1 Trust through the lens of transaction cost theory 3.2.2 Trust freedom, and vulnerability – an ethical perspective 3.3 A theoretical framework to study the phenomenon of trust 3.4 Trust vs. time 3.4.1 Relationship life cycle 3.4.2 The model of trust & distrust in relationship building 3.5 Trust and network approach 3.6 Epilogue Chapter IV: Methodology 4.1 Prologue: The choice of qualitative research as a methodological approach 4.1.1 Validity of qualitative research 4.1.2 Reliability, credibility and characteristics of qualitative research 4.2 Phenomenology – studying a phenomenon 4.3 Sampling 4.3.1 Judgement sampling 4.3.2 Snowball sampling 4.4 Questionnaire 4.5 The data 4.6 Epilogue of the methodological approach Chapter V: Analysis 5.1 The coding manual 5.2 Coding technique for the first cycle 5.3 Recoding and categorising – Second cycle 5.4 Post- second cycle coding findings 5.5 Does the research require a third cycle coding? 5.6 Data saturation in qualitative interviews 5.6.1 Factors determining data saturation 5.6.2 Guidelines on the size of the sample Chapter VI: Results 6.1 Prologue 6.1.1 The ‘pre-relationship’ stage in a ‘successful’ bank(er)-client relationship 6.1.2 The constructs of goodwill at the “pre-relationship” phase 6.2 Exordium – The introduction phase 6.3 Incrementum – The growth/build-up phase 6.4 Maturitatem – The maturity phase 6.4.1 Situation 1: Superior interpersonal trust 6.4.2 Situation 2: Superior company trust 6.5 How does trust evolve in an investment bank(er)-client relationship? 6.6 Declino – The decline phase: The sub-areas of research interest 6.6.1 Scams 6.6.2 Living up to the expectations 6.6.3 Issue with additional services 6.6.4 Transparency and predictability 6.6.5 Can trust be regained? – A contextual question Chapter VII: Discussion of results 7.1 A pragmatic approach in relation to the research gap 7.2 Transaction cost theory and a ‘free’ perspective 7.3 Goodwill and resource-based theory 7.4 Stakeholder theory, service/performance quality, and relationship marketing 7.5 The debate on trust and time 7.5.1 The model of trust and distrust in relationship development 7.5.2 Relationship life cycle 7.6 Network approach, recommendation, and 3D negotiation 7.7 Contractual trust and a phase of ‘neutrality’ 7.8 Trust vs. reliance Chapter VIII: Conclusion Publication bibliography Appendices

Par comparaison avec la littérature sur les fusions-acquisitions nationales, celles sur les fusions-acquisitions transfrontalières (Cross-Border Mergers & Acquisitions, CBM&A) est relativement récente. En particulier, nous avons encore très peu d’études sur les fusions-acquisitions entre les entreprises des pays développés et émergents. Cette thèse considère trois questions rarement abordées jusqu’à présent. 1) Est-ce que la diversification industrielle peut expliquer les fusions-acquisitions entre les entreprises européennes et des marchés émergents? 2) Est-ce que le marché valorise plus dans ces opérations les actions de diversification industrielle? 3) Quelles sont les modalités de paiement préférées dans ce type d’opérations ? Parallèlement, nous avons comparé ces opérations de fusions-acquisitions à celles ayant lieu en France et à l’intérieur de l’Union Européenne. Fondés sur 2406 fusions-acquisitions en France, 7628 à l’intérieur de l’Union Européenne et 1857 entre des entreprises européennes et des marchés émergents sur la période 1992(1998)-2012, nos résultats sont les suivants. Premièrement, conformément à ce qui est observé dans les fusions-acquisitions entre des entreprises des pays développés mais contrairement à ce que laisse entendre la littérature théorique sur les investissements dans les marchés émergents, les fusions-acquisitions entre les entreprises européennes et de pays émergents sont plutôt des opérations de spécialisation industrielle. Nous constatons également que la relation entre la diversification internationale et la diversification industrielle est négative. Deuxièmement, les effets d'annonce des CBM&A entre les pays de l’'Union Européenne et les marchés émergents se traduisent par une augmentation de richesse des actionnaires des entreprises européennes acquéreuses. Cependant, par rapport aux fusions et acquisitions réalisées entièrement à l'intérieur de l'Union Européenne et en France, les effets d’annonces sont beaucoup moins positifs. Troisièmement, les marchés financiers sous-évaluent les entreprises européennes lors des fusions-acquisitions avec des entreprises de pays émergents. Nos résultats démontrent que les entreprises acquéreuses payent moins en espèces dans les fusions-acquisitions avec des entreprises des marchés émergents qu’avec d’autres entreprises européennes. En revanche, les primes payées ne sont pas significativement différentes. Nos résultats suggèrent aussi que les dirigeants des entreprises Européennes ne jouent pas sur le « market timing » lors de leurs décisions de paiement. Cette thèse a des implications importantes pour des futurs acquéreurs d’entreprises de pays émergents. Compte tenu des résultats obtenus sur la fin de notre période d’analyse, elle révèle que la diversification industrielle dans les fusions et acquisitions d’entreprises de pays industrialisés avec des entreprises de marchés émergents est plus importante ces dernières années, et qu’elle a un impact positif. Nous pensons que les résultats peuvent être attribuables soit à la crise financière soit à une meilleure intégration des marchés émergents dans l'économie mondiale. Elle met aussi en évidence qu'il existe des conflits d'intérêts clairs entre les investisseurs et les dirigeants lors de fusions-acquisitions entre des entreprises européennes et de pays émergents. / Compared to domestic M&A, the literature of cross-border M&A is relatively fewer. Most of the current research is based on US studies. We also have much less knowledge about the cross-border M&A from developed countries to emerging countries. Motivated by the general research background, the thesis conducted three distinctive papers regarding cross-border M&As from European Union (EU) to emerging countries. We propose three research questions that are seldom addressed in previous literatures: 1) Does industrial diversification explain the cross-border M&A from the European Union to emerging countries? 2) Do market value industrial specialization or diversification in CBM&A with emerging countries? 3) Do acquiring managers take advantage of the market timing in payment decisions in CBM&A with emerging countries? In addition, we compared the CBM&As with those of domestic France as well as the CBM&As inside the European Union. Based on 2406 fusions-acquisitions in France, 7628 CBM&As inside the European Union, and 1857 CBM&As between European firms and the emerging markets during 1992-2012, we find the following results. First, consistent with what is observed in prior M&As literatures between companies in developed countries but contrary to what is suggested in the theoretical arguments in earlier literatures about emerging countries, we show CBM&As from the European Union to emerging countries are industrially specialized rather than industrially diversified. We find that there is a negative relationship between international diversification and industrial diversification. Second, we found that the announcement effects for CBM&As between the E.U.-15 and emerging market are positive, but compared to CBM&As conducted wholly inside the E.U.-15 and domestic M&As in France, they are significantly less positive due to the focus on industrial diversification versus specialization. Third, we found the market undervalues the acquiring firms in CBM&A from the European Union to emerging countries. The acquiring managers do not take the advantage of the market timing when making their payment decisions. Our results show the acquiring firms do not incline to pay cash in CBM&A to emerging countries but rather in CBM&A inside European Union. In the meanwhile, we find the premium paid by the acquiring firms are not different from CBM&As inside the European Union. Our analyses evidence that acquiring firms are reluctant to pay cash in CBM&As with emerging countries. The thesis contributes to the current M&A empirical literatures and it has provided important research implications. It highlights also that there are clear conflicts of interests between investors and managers in the cross-border from the European Union to emerging countries. The thesis also opens new perspectives for the future research. For example, we observed that industrial diversification has an increasing trend in recent years, and it is valued positively by the market. We believe the results may be attributable to either the financial crisis or the better integration of emerging markets into the world economy.