Summary:

Using data from a study about US mergers and acquisitions (M&A), this week’s chart shows that the probability of M&A announcement increases when the workforces of the merging firms have similar political ideologies. In the United States, the dominant way of classifying political ideology tends to be either liberalism or conservatism, which aligns with the aims of two primary political parties- Democrat or Republican (Chow et al., 2021).

The steep blue line in the chart shows this positive relationship as more intense when political ideology is more homogenous amongst the workforce in the acquiring firm. Homogeneity in political ideology implies that the majority of the workforce follows a similar political ideology (liberalism or conservatism).

When homogeneity is high, political ideology matters more for employees. This causes managers to consider the alignment of political ideologies while deciding on M&A targets as they wish to retain employees post-merger. As such, a positive relationship between M&A announcement likelihood and target-acquirer political ideology similarity arises.

Reference:

Chow et al., (2021), Marriage to the Same Kind: Organizational Political Ideology and Mergers and Acquisitions, Organization Studies,

First Online at: https://doi.org/10.1177/0170840621989006. Also featured in the MIT Sloan Management Review, https://sloanreview.mit.edu/article/how-political-ideology-can-impact-the-success-of-mas.

Article By CHOW Yi Lin, Dawn

Graphic By Yixuan GE