Political uncertainty and deal structure: Evidence from Australian mining project acquisitions

This study investigates whether acquisition deal structure matters in mitigating political uncertainty-related costs. Utilizing a large hand-collected sample of 3283 project acquisitions by Australian mining exploration entities over 1998-2017, we find that acquirers tend to structure transactions in stages in response to high political uncertainty. In addition, the stock market reacts more favourably to staged acquisitions than non-staged acquisitions when higher political uncertainty is observed. Further, we identify three potential mechanisms through which staged acquisitions help acquirers reduce the negative consequences of political uncertainty: low abandonment costs, the securing of overseas targets, and long contract duration. Overall, our findings underscore the importance of staged deal structure as an uncertainty-mitigation strategy in acquisitions.