Local government's “black box” in small and medium‐sized private enterprises' trans‐ownership M&A failure

Purpose This paper aims to examine the reasons for small and medium sized private enterprises' (SMPE) trans‐ownership M&A failure, with particular focus on the local government behavior in the multi‐property claimant environment. Design/methodology/approach Using evidence from two typical cases of private enterprises' trans‐ownership M&A failure, the study adopts a multi‐method approach to illuminating the important reason. Findings The findings show that the alienation of local government is the most important reason for the failure of M&As and this has more to do with the economic and political gains of some individuals or groups in local governments than the ideology prejudice of local governments. Practical implications The paper suggests that it is necessary for SMPEs not only to look into target corporation but also the local government, when they prepare to engage in trans‐ownership M&A activities. Originality/value The paper explores the alienation of local government, which largely results in SMPEs' trans‐ownership M&A failure in China.