Acquisitions and the evolution of operational performance across the firm

Manufacturing firms frequently expand their production capacity through the acquisition of industrial units. How are the different existing units in the acquirer company affected by the acquisition of another facility? I argue that two important factors to understand the effects of acquiring another unit are geographic proximity and operational similarity. Using a unique dataset from a family-owned Brazilian agribusiness company, I find that an existing unit that is geographically close to a recently acquired unit experiences a decrease in its performance. In contrast, an industrial unit that is operationally similar to an acquiree experiences an increase in its operational performance. The evidence also shows that these two effects tend to decrease over time. Finally, the size of the existing unit counteracts these effects. The results illustrate the complexity of the relationship between acquisition events and performance across the firm. The acquisition of an industrial unit has different effects on the existing units in the acquirer company.