The paper attempts to explore the plausibility and validity of theoretical relationship between determination of controlling an acquired firm’s capital, assets and brand values versus its capability of innovation, and ex post performance of Vietnam’s M&A industry amid the resurgence of the Mergers and Acquisitions (M&A) wave from 2005 to 2012. The study mainly employs logistic regressions performed on a categorical data sample, consisting of 212 M&A cases. The results reported from this analysis suggest significant and plausible relationship between pre-M&A pursuit of innovation (versus capital/physical assets) of the acquired and post-M&A performance. In addition, pre-M&A expenditures tend to cause poor post-M&A performance. As a plausible reasoning, the paper concludes that creative performance can be a factor to pursue in M&As, which suggests the need to emphasize capable and willing human capital. However, in a wave of M&A where pursuits of capital resources, assets and brand value are overemphasized, the influence of innovation factor to the ex post success becomes negligible.

The study attempts to investigate the evolution and dataset on actual transactions of Mergers and Acquisitions (M&A) in Vietnam’s emerging economy from 2005 to 2012 when M&A value was estimated around $10 bn. Vietnam’s reintegration into the world economy has not been without obstacles and difficulties (Stiglitz, 2008). The rush for financial resources can be seen very clearly in the early stage of development of the Vietnamese capital markets and financial system, where both equity and debt finances have become a frenzy (Vuong et al., 2010; and Vuong and Tran, 2011). Since Vietnam’s M&As began in earnest during the post-WTO globalization process, it may be a signal for the complexity of the economy’s next period of transition. In emerging markets, foreign Transnational Corporations (TNC) may pursue a strategy of taking over resources (capital/physical) and market positioning, partly defined by the brand strength of the acquired firm in a local market. Vietnam’s 1990-2010 M&A data showed that 79.4% of the M&A attempts came from foreign firms acquiring domestic ones (Vuong et al., 2010).

Both acquiring and acquired firms seek economic benefits when entering M&A agreements. Thus M&As involve changes and expectation of profit opportunities for the parties involved, as well as some level of innovation (Drucker, 1986, p. 81). However, as many sellers consider M&As a way to exit from their industries with satisfactory gains, they are unlikely to initiate structural changes and innovations. The current trend may represent a shift in the economic function of local business people from being entrepreneurs to more of capitalists. In fact, motivated to exit the industry, the selling entrepreneur shows her declining commitment to both the future of the acquired firm and any future innovation. Consequently, future innovation would likely be in the hands of the acquiring one. Presumably, this has to be decided ex ante.

Business Strategy, Journal, Innovations, Capital Expenditures, Post-M&A Performance, Mergers and Acquisitions (M&A), Transnational Corporations (TNC), M&As, Controlling, Acquired firm’s capital, .