The effect of cross-border mergers & acquisitions as a driver of better corporate sustainability practices - A study on the post-acquisition context of selected target firms from Sri Lanka and Sweden

Sammanfattning: Companies typically strive to expand their realms. To do so, they rely on a series of organic and non-organic growth options, the latter including Mergers and Acquisitions (M&As). M&As continue to grow in number and frequency across national and regional borders in search of strategic complementarity. With the growing importance devoted to social and environmental factors by business firms of the contemporary world, M&As too, like other organizational strategies of multinationals, appear to be increasingly intertwined with sustainability and its practices. Many recent high-profile M&As between socially and environmentally progressive firms and corporations affirm this trend while there is empirical evidence that endorse sustainability criteria in corporate transactions. This research is a combinatorial study between the cross-border M&As and corporates’ practice of sustainability where the effect of M&A as a driver of better corporate sustainability practices in the post-M&A context is explored. The exploration is conducted under two areas, where firstly the study looks at whether and how a cross border M&A effect the corporate sustainability practices of a target firm and secondly it intends to find what effect does the acquirer’s background have on the target firm’s corporate sustainability practices. 14 semi- structured interviews were conducted among target firms within manufacturing, information technology and automotive industries, and M&A deal experts from Sri Lanka and Sweden. Analysis conducted under 9 themes of corporate sustainability practice areas and background influences demonstrated that M&As motivated by strategic growth drive a higher effect on the corporate sustainability practices of the target firm in the post M&A context. Further, a healthy sustainability orientation of the firm and the origin country of the acquirer has a positive effect on driving better corporate sustainability practices through the M&A towards its target across borders. Interestingly this drive could happen in reverse too, where practice flow from the target to the acquirer. Concluding the study, the findings shed light to a critical review on concerns around exploiting M&As to create synergistic value creation in sustainability across economies.