What Motivates Minority Acquisitions? The Trade-Offs between a Partial Equity Stake and Complete Integration

Minority acquisitions, involving less than 50% of the target, represent a distinct organizational choice. Minority acquisition can mitigate some of the incentive problems that arise in contractual relationships. Less is known, however, about the trade-off between minority acquisitions and complete integration. We find that minority acquisitions are more common when keeping target managerial incentives intact is important and when the target is financially constrained or can benefit from certification. Minority acquisitions are also more likely when the target's valuation is especially uncertain; integrating internal capital markets will be costly; and consolidating earning will lower earnings per share (EPS).