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In the fashion industry, acquisitions have become commonplace across company types, from established luxury brands to startups. In 2018, 38% of all M&As in 12 luxury sectors ranging from apparel to hotels were carried out in the apparel & accessories and watches & jewelry sectors (Deloitte, 2019). From the acquired company’s perspective, the acquisition allows access to resources needed for growth (Porter, 1987). However, for existing customers, such a major organizational change creates uncertainty about the company’s business continuity, particularly whether future product offerings will continue to meet their expectations. For example, upon the acquisition announcements, the customers of Bonobos and ModCloth expressed concerns about the product design becoming generic and the deterioration in quality (Bain, 2018). Despite the potential negative effects of acquisitions, research on customer reactions to acquisitions is scant. Based on signaling theory, which explains consumer behavior amidst imperfect information and informational asymmetry, the study posits that customers will seek information or signals to anticipate how the acquisition will affect future product offerings. This study identified three signals customers may rely on: post-acquisition operational independence of the acquired company, involvement of the acquired company’s founder/CEO, and organizational fit between the acquiring and acquired companies. If these signals lead customers to make favorable inferences about future product offerings, their re-patronage and WOM intention will be high. As such, the purpose of this study is to propose a research framework to examine how the three signals lead consumers to form expectations for future product offerings, which in turn can influence re-patronage and WOM intention.

Will You Stay the Same? Examining Customer Reactions to Acquisitions