Corporations as stepfamilies: A new metaphor for explaining the fate of merged and acquired companies

Academy of Management Executive

Volumn 19, Issue 3, 2005, Pages 23-37

  Allred, Brent B ^a   Boal, Kimberly B ^b   Holstein, William K ^a  

^a Dept of Economics and Thomas Jefferson Program in Public Policy at the College of William and Mary   (United States)

^b TEXAS TECH UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 29144475330     PISSN: 10795545     EISSN: None     Source Type: Journal    
DOI: 10.5465/AME.2005.18733213     Document Type: Review

References (83)

1. John Reed's comments on the challenges that occurred during the merger between Citicorp and Travelers Group are found in Huff, A.S., Ed. 2000. Citigroup's John Reed and Stanford's James March on management research and practice. Academy of Management Executive, 2000, 14(1): 61.
2. Frieswick, K. 2005. Fools Gold. CFO, February 2005, 27.
3. M&A failure rates of 50 percent and higher have been found in various studies, including: Bergh, D. D. 1997. Predicting divestiture of unrelated acquisitions: An integrative model of ex ante conditions. Strategic Management Journal, 16: 221-239;
4. Montgomery, C. A. & Wilson, V. A. 1986. Mergers that last: A predictable patttern. Strategic Management Journal, 7: 91-96.
5. Boselovic, L. 2005. Mellon selling troubled HR unit. Pittsburgh Post-Gazette, March 17, 2005, C1.
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7. Frieswick, K. 2005. Fools Gold. CFO, February 2005, 27.
8. For reviews see: Bergh, D. D. 2001. Diversification strategy research at a crossroads: Established, emerging, and anticipated paths. In M. A. Hitt, R. E. Feeman, & J. S. Harrison (Eds.), Handbook of strategic management. Oxford: Blackwell Publishers Ltd., 362-383.
9. Haspeslagh, P. C. & Jemison, D. B. 1991. Managing acquisitions: Creating value through corporate renewal. New York: The Free Press.
10. Huff, A.S., Ed. 2000. Citigroup's John Reed and Stanford's James March on management research and practice. Academy of Management Executive, 2000, 14(1): 61.
11. Porter, M. E. 1987. From competitive advantage to corporate strategy. Harvard Business Review, 45(3): 46-49.
12. For a discussion of the market for corporate control see Manne, H. G. 1965. Mergers and the market for corporate control. Journal of Political Economy, 73: 110-120.
13. Similar arguments were later used in the development of Agency Theory. See Jensen, M. C., & Meckling, W. H. 1976. Theory of the firm: Man agerial behavior, agency costs and ownership- structure. Journal of Financial Economics, 3: 305-360.
14. Carly Fiorina, Feb. 4, 2002, "Hallmarks of a Successful Merger," presentation to Goldman Sachs Technology Conference.
15. Frieswick, K. 2005. Fools Gold. CFO, February 2005, 27.
16. The resource view or Resource-Based View (RBV) of the firm considers the firm as a set of resources that can be combined to create distinctive competencies and sustainable competitive advantages. See Wernerfelt, B. 1984. A resource-based view of the firm. Strategic Management Journal, 5(2): 171-180;
17. Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17(1): 99-120;
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19. It may seem strange to quote Carly Fiorina, former CEO of Hewlett-Packard, who was fired by her board as this paper was being edited. But HP's interim leadership says that HP had the right technology strategy, but the wrong person to execute it. Since the quote deals with strategy, we decided to keep it - but it is ironic that Fiorina, apparently did not truly appreciate the meaning of "meets criteria for smooth and effective integration." Carly Fiorina, Feb. 4, 2002, "Hallmarks of a Successful Merger," presentation to Goldman Sachs Technology Conference.
20. Specific data on business executive divorce rates and involvement in stepfamily relationships are unavailable. The authors believe that business executives are equally, if not more, susceptible to marriage disruption pressures than society in general. If societal statistics for divorce and stepfamilies hold for business executives, a significant number of executives are currently in stepfamily situations.
21. Marano, H. E. 2000. Divorced? Don't even think of remarrying until you read this. Psychology Today, 33: 56-62;
22. Bergh, D. D. 1997. Predicting divestiture of unrelated acquisitions: An integrative model of ex ante conditions. Strategic Management Journal, 16: 221-239.
23. Weed, J. 1980. National estimates of marriage dissolution and survivorship: United States. DHHS, Vital and Health Statistics, Series 3. Washington, D. C.: United States Government Printing Office.
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25. Hetherington, E. M. & Stanley-Hagen, M. 2000. Diversity among stepfamilies. In D. H. Demo, K. R. Allen, & M. A. Fine (Eds.), Handbook of family diversity. Oxford: Oxford University Press: 177-196.
26. White, L. K., & Booth, A. 1985. The quality and stability of remarriages: The role of stepchildren. American Sociological Review, 50: 689-698. These authors suggest 22 basic forms of stepfamilies.
27. While technically, subsidiaries and employees of both the bidding and acquired firm are stepchildren to the other firm, we argue the employees of the bidding firm are viewed as the natural children, having a privileged position in terms of resources and opportunities because of their biological link to the dominant parent.
28. Hakim, D. 2003. You say "takeover." I say "merger of equals." New York Times, section 3, 1.
29. Haspeslagh, P. C., & Jemison, D. B. 1991. Managing acquisitions: Creating value through corporate renewal. New York: The Free Press;
30. Trautwein, F. 1990. Merger motives and merger prescriptions. Strategic Management Journal, 11, 283-295
31. Cherlin, A. J. 1978. Remarriage as an incomplete institution. American Journal of Sociology, 86: 634-650.
32. For research on non-economic explanations for M&A fate, see: Buono, A. F. & Bowditch, J. L. 1989. The human side of mergers and acquisitions: Managing collisions between people, cultures, and organizations. San Francisco, CA: Jossey-Bass;
33. Datta, D. 1991. Organizational fit and acquisition performance: Effects of post-acquisition integration. Strategic Management Journal, 12: 281-297.
34. Haspeslagh, P. C., & Jemison, D. B. 1991. Managing acquisitions: Creating value through corporate renewal. New York: The Free Press.
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46. The theory of relative standing suggests that the status of top managers in the acquired firm will be diminished and that this diminished status will also negatively bias the attitudes of the employees of the target firm towards the acquiring firm. Compared to stepfamily theory, there is comparative little research on the theory of relative standing, but see: Very, P., Lubatkin, M., Calori, R., & Veiga, J. 1997. Relative standing and the performance of recently acquired European firms. Strategic Management Journal, 18: 593-614.
47. Ravernscraft, D. J., & Scherer, F. M. 1988. Mergers and managerial performance. In J. C. Coffee, Jr., L. Lowenstein, & S. Rose-Ackerman (Eds.), Knights, raiders, and targets: The impact of the hostile takeover. New York: Oxford University Press, 63-81.
48. Chatterjee, S., Lubakin, M. H., Schweiger, D. M., & Weber, Y. 1992. Cultural differences and shareholder value in related mergers: Linking equity and human capital. Strategic Management Journal. 13: 319-334.
49. In the management literature, these concepts are described by Institutional Theory. For a review, see: Tolbert, P. S., & Zucker, L. G. 1996. The Institutionalization of institutional theory. In S. R. Clegg, C. Hardy, and W. R. Nord (Eds.), Handbook of organization studies. London: Sage, 175-190.
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54. Ganong, L. H., & Coleman, M. 1984. Effects of remarriage on children: A review of the empirical literature. Family Relations, 33: 389-406.
55. Hambrick, D. C., & Cannela, A. A. 1993. Relative standing: A framework for understanding departures. Academy of Management Journal, 36(4): 733-762.
56. Hambrick, D. C., & Cannela, A. A. 1993. Relative standing: A framework for understanding departures. Academy of Management Journal, 36(4): 733-762. The difference between biological discrimination and relative standing is that biological discrimination is based upon a difference in attachment whereas relative standing is based upon a social comparison process.
57. Hetherington, E. M., & Jodl, K. M. 1994. Stepfamilies as settings for child development. In A. Booth & J. Dunn (Eds.), Stepfamilies: Who benefits? Who does not? Hillsdale, NJ: Law-rence Erlbaum Associates, 55-79;
58. Booth, A., & Edwards, J.N. 1992. Starting over. Why remarriages are more unstable, Journal of Family Issues, 13: 179-194.
59. Booth, A., & Edwards, J.N. 1992. Starting over. Why remarriages are more unstable, Journal of Family Issues, 13: 179-194.
60. Booth, A., & Edwards, J.N. 1992. Starting over. Why remarriages are more unstable, Journal of Family Issues, Ibid. 13: 179-194.
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62. An empirical study by the authors found that the greater the size differential between acquiring and target firm, the greater the likelihood the union will fail. This agrees with the findings of Bergh, D. D. 1995. Size and relatedness of units sold: An agency theory and resource-based perspective. Strategic Management Journal, 16: 221-239.
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76. The empirical study by the authors noted above also found that the greater the financial commitment made by the acquiring firm towards the target firm, the higher the likelihood of success.
77. Haspeslagh, P., & Jemison, D. 1991. Managing acquisitions. New York: Free Press;
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