Value Leakages in Mergers and Acquisitions. Why they occur and how they can be addressed

Long Range Planning

Volumn 41, Issue 2, 2008, Pages 197-224

  Meyer, Christine Benedichte ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

INDUSTRIAL MANAGEMENT; MANAGERS; SHAREHOLDERS; SOCIETIES AND INSTITUTIONS;

MERGER AND ACQUISITION PERFORMANCE; STAKEHOLDERS; VALUE LEAKAGES;

MERGERS AND ACQUISITIONS;

MANAGEMENT; MERGER; TRADE-OFF;

EID: 42149136144     PISSN: 00246301     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.lrp.2008.01.003     Document Type: Article

References (90)

1. For discussion on different types of synergies and how they can be realised in the implementation process see. Haspeslagh P.C., and Jemison D.B. Managing acquisitions (1991), Free Press, New York
2. Schweiger D.M., Csiszar E.N., and Napier N.K. A strategic approach to implementing mergers and acquisitions. In: Krogh G.V., Sinatra A., and Singh H. (Eds). The Management of Corporate Acquisitions (1994), Macmillian Press, London 23-49
3. Copeland T., Coller T., and Murrin J. Valuation: measuring and managing the value of companies. 3rd ed. (2000), John Wiley, New York
4. Sirower M.L. The synergy trap: how companies lose the acquisition game (1997), Free Press, New York
5. Sirower M.L. Becoming a prepared acquirer. European Business Forum 16 (2004) 55-59
6. Gaughan P.A., and Mergers. What can go wrong and how to prevent it (2005), Wiley and Sons, New Jersey
7. This definition of value leakage is taken from. Gates S., and Very P. Measuring performance during M&A integration. Long Range Planning 36 (2003) 167-185
8. Empire-building. Trautwein F. Merger motives and merger prescriptions. Strategic Management Journal 11 (1990) 283-295
9. Hayward M.L.A., and Hambrick D.C. Explaining the large premiums paid for large acquisitions: evidence of CEO hubris. Administrative Science Quarterly 42 (1997) 103-127
10. Resistance to takeovers. Kosnik R.D., and Turk T.A. The antecedents and consequences of resistance to takeovers. In: Krogh G.V., Sinatra A., and Singh H. (Eds). The Management of Corporate Acquisitions (1994), Macmillian Press, London 170-190
11. For research on organisational fit and cultural clashes see. Buono A.F., and Bowditch J.L. The human side of mergers and acquisitions (1989), Jossey-Bass Publishers, San Francisco
12. Cartwright S., and Cooper C.L. Mergers and acquisitions. The human factor (1992), Butterworth Heinemann, Oxford
13. Larsson R., and Lubatkin M. Achieving acculturation in mergers and acquisitions: an international case study. Human Relations 54 (2001) 1573-1607
14. Nahavandi A., and Malekzadeh A.R. Acculturation in mergers and acquisitions. Academy of Management Review 13 (1988) 79-90
15. Dysfunctional reactions. Marks M.L., and Mirvis P.H. Merger syndrome: stress and uncertainty, mergers and acquisitions. Mergers and Acquisitions Summer (1985) 50-55
16. Marks M.L., and Mirvis P.H. Merger syndrome: management by crisis, part II. Mergers and Acquisitions Jan/Feb (1986) 70-76
17. Paruchuri S., Nekar A., and Hamrick D.C. Acquisitions integration and productivity losses in the technical core: disruption of inventors in acquired companies. Organization Science 17 (2006) 545-562
18. Loss of identity. Bartels J., Douwes R., de Jong M., and Pruyn A. Organisational identification during a merger: determinants of employees expected identification with the new organisation. British Journal of Management 17 (2006) S49-S67
19. van Dick R., Ullrich J., and Tissington P.A. Working under a black cloud: how to sustain organisational identification after a merger. British Journal of Management 17 (2006) S69-S79
20. Bekier M.M., Bogardu A.J., and Oldham T. Why mergers fail. McKinsey Quarterly 4 (2001) 6-10
21. M.M. Bekier and M.J. Shelton, Keeping your sales force after the merger, McKinsey Quarterly 4;
22. K. Basu, Merging brands after mergers, California Management Review 48(4), 28-40.
23. Amihud Y., and Lev B. Risk reduction as a managerial motive for conglomerate mergers. Bell Journal of Economics 12 (1981) 605-617
24. Amihud Y., and Lev B. Does corporate ownership structure affects its strategy towards diversification?. Strategic Management Journal 20 (1999) 1063-1069
25. Communication. Bastien D.T. Common patterns of behavior and communication in corporate mergers and acquisitions. Human Resource Management 26 (1987) 17-33
26. Napier N.K., Simmons G., and Stratton K. Communication during a merger: the experience of two banks. Human Resource Planning 12 (1989) 105-122
27. Schweiger D.M. Communication with employees following a merger: a longitudinal field experiment. Academy of Management Journal 34 (1991) 110-135
28. Graebner M.E. Momentum and serendipity: how acquired leaders create value in the integration of technology firms. Strategic Management Journal 25 (2004) 751-777
29. For M&A research on involvement in particular see for example. Mirvis P.H., and Marks M.L. Managing the merger. Making it work (1992), Prentice Hall, Englewood Cliffs, NJ
30. A.F. Buono and J.L. Bowditch (1989) op. cit. at Ref 5.
31. Involvement. Collier N., Fishwick F., and Floyd S.W. Managerial involvement and perceptions of strategy process. Long Range Planning 37 (2004) 67-83
32. Ahlbrandt R.S., Leana C.R., and Murrell A.J. Employee involvement programmes improve corporate performance. Long Range Planning 25 (1992) 91-98
33. Fairness considerations. Schweiger D.M., Csiszar E.N., and Napier N.K. A strategic approach to implementing mergers and acquisitions. In: Krogh G.V., Sinatra A., and Singh H. (Eds). The Management of Corporate Acquisitions (1994), Macmillian Press, London 23-49
34. Meyer C.B. Allocation processes in mergers and acquisitions: an organisational justice perspective. British Journal of Management 12 1 (2001) 47-66
35. For M&A advice on speed and customer retention from a practical point of view see. Coopers, and Lybrand. Speed makes the difference: a survey of mergers and acquisitions (1996), Coopers and Lybrand
36. Feldman M.L., and Spratt M.F. Five frogs on a log (1999), John Wiley and Sons, Chichester, England
37. McKinsey. Why mergers fail. McKinsey Quarterly 4 (2001) 6-10
38. For a more critical view on the importance of speed see. Angwin D. Speed in M&A integration: the first 100 days. European Management Journal 22 (2004) 418-430
39. For articles looking at different type of M&As and their consequences for management see. Hunt J. Changing pattern of acquisition behaviour in takeovers and the consequences for acquisition processes. Strategic Management Journal 11 (1990) 69-77
40. Bower J.L. Nor all M&As are alike - and that matters. Harvard Business Review March (2001) 93-101
41. C.B. Meyer and E.E. Altenborg, Incompatible strategies in international mergers: the failed merger between Telia and Telenor, forthcoming in Journal of International Business Studies
42. Meyer C.B., and Altenborg E.E. The disintegrating effects of equality: the failed merger between Telia and Telenor. British Journal of Management 18 (2007) 257-271
43. Meyer C.B., and Stensaker I.G. Managing multiple change processes: challenges and intervention techniques (2007), Academy of Management Proceedings, Philadelphia
44. Meyer C.B., and Nygaard J.T. Når identiteter utfordres: Fusjonen mellom SAS og Braathens (Challenging the identities: the merger between SAS and Braathens). Impuls, tidsskrift for psykologi 61 1 (2007) 105-113
45. Meyer C.B. Destructive dynamics of middle management intervention in post-merger processes. Journal of Applied Behaviour Science 42 4 (2006) 397-419
46. Stensaker I.G., Meyer C.B., Falkenberg J., and Haueng A.C. Excessive change: coping mechanisms and consequences. Organizational Dynamics 31 3 (2002) 296-312
47. Jemison D.B., and Siktin S.B. Acquisitions: the process can be a problem. Harvard Business Review March April (1986) 107-116
48. For an excellent discussion on the acquired managers' preference for autonomy see. Hambrick D.C., and Canella A.A. Relative standing: a framework for understanding departures. Academy of Management Journal 36 (1993) 733-762
49. The challenges involved in integrating knowledge intensive firms has been thoroughly discussed in S. Paruchuri, A. Nekar and D.C. Hamrick (2006) op. cit. at Ref 6
50. Schweizer L. Organizational integration of acquired biotechnology companies into pharmaceutical companies: the need for a hybrid approach. Academy of Management Journal 48 (2005) 1051-1074
51. Pablo A. Determinants of acquisition integration level: a decision making perspective. Academy of Management Journal 37 (1994) 803-836
52. M.E. Graebner (2004) op. cit. at Ref 9;
53. Zollo M.H., and Singh H. Deliberate learning in corporate acquisitions: post acquisition strategies and integration capability in U.S. bank mergers. Strategic Management Journal 25 (2004) 1233-1256
54. For a more thorough understanding of strategizing see special issue of Long Range Planning on Strategizing and Organizing 39(6) December 2006, including: A. Pye and A. Pettigrew, Strategizing and Organizing: Change as a Political Learning Process, Enabled by Leadership, 583-590
55. J.W. Rivkin and N. Siggelkow, Organizing to Strategize in the Face of Interactions: Preventing Premature Lock-in, 591-614
56. R. Whittington, E. Molloy, M. Mayer and A. Smith, Practices of Strategising/Organising: Broadening Strategy Work and Skills, 615-629
57. P. Jarzabkowski and E. Fenton, Strategizing and Organizing in Pluralistic Contexts, 631-648
58. C. Price, C. Roxburgh and D. Turnbull, Strategizing and Organizing for Performance and Health, 649-662
59. I.D. Colville and A.J. Murphy, Leadership as the Enabler of Strategizing and Organizing, 663-677.
60. See discussion on measuring performance during post-merger integration in S. Gates and P. Very (2003) op. cit. at Ref 3.
61. In their classic text. Fisher R., and Ury W. Getting to yes (1981), Houghton Mifflin Company, Boston considers How to develop your BATNA - Best alternative to a negotiated agreement
62. Balogun J. From blaming the middle to harnessing its potential: creating change intermediaries. British Journal of Management 14 (2003) 69-83
63. Balogun J. Managing change: steering a course between intended strategies and unanticipated outcomes. Long Range Planning 39 (2006) 29-49
64. N. Collier, F. Fishwick and S. Floyd (2004) op. cit at Ref 9.
65. M. Graebner (2004) op. cit at Ref 9.
66. Bheagwati J. Directly unproductive, profit-seeking (DUP) activities. Journal of Political Economy 90 (1982) 988-1002
67. For discussion on two-way communication see D. Tourish, Ten commandments for improving strategy and decision making, Long Range Planning, 38, 485-503.
68. A discussion of the usefulness of combining competence or efficiency and procedural justice is introduced in C. B. Meyer (2001) op. cit. at Ref 9.
69. For a more general introduction to procedural justice see Leventhal's and Lind and Tyler's seminal works. Leventhal G.S. What should be done with equity theory? New approaches to the study of fairness in social relationships. In: Gergen K.J., Greenberg M.S., and Willis R.H. (Eds). Social Exchange (1980), Advances in Theory and Research, Plenum, New York 27-55
70. Lind E.A., and Tyler T.R. The social psychology of procedural justice (1988), Plenum Press, New York
71. For procedural justice and its impact in a business context see. Konovsky M. Understanding procedural justice and its impact on business organizations. Journal of Management 26 (2000) 489-511
72. For a discussion of how involvement creates opportunity for increased political behaviour and how this behaviour wastes resources see N. Collier, F. Fishwick and S.W. Floyd (2004) op. cit. at Ref 9.
73. For a further discussion of how stakeholders can be selectively excluded see C.B. Meyer and I.G. Stensaker, Making radical change happen through inclusion and exclusion of stakeholders, forthcoming in British Journal of Management.
74. For discussion of evidence on relatedness and performance see. Chatterjee S., and Lubatkin M. Corporate mergers, stockholder diversification, and changes in systematic risk. Strategic Management Journal 11 (1990) 255-268
75. Singh H., and Montgomery C. Corporate acquisition strategies and economic performance. Strategic Management Journal 8 (1987) 377-386
76. For a review and recent study of how experience affects performance see. Haleblian J., and Finkelstein S. The influence of organizational acquisition experience on acquisition performance: a behavioural learning perspective. Administrative Science Quarterly 44 (1999) 29-56
77. Finkelstein S., and Haleblian J. Understanding acquisition performance: the role of transfer effects. Organizsation Science 13 (2002) 36-47
78. For discussions of the need to focus on more than one remedy at the time and explore more complex relationships see M. Zollo and H. Singh (2004) op. cit. at Ref 15
79. Teerikangas S., and Very P. The culture-performance relationship in M&A: from yes/no to how. British Journal of Management 17 (2006) 69-79
80. Moeller S.E., Schlingemann F.P., and Stulz R.M. Wealth destruction on a massive scale? A study of acquiring firm returns in the recent merger wave. The Journal of Finance 60 2 (2005) 757-782
81. H.G. Barkema and M. Schijven, Towards unlocking the full potential of acquisitions: the role of organizational restructuring, forthcoming in Academy of Management Journal.
82. For articles on replicated case studies that put together different studies collected over a number of years see. Denis J.L., Lamothe L., and Langley A. The dynamics of collective leadership and strategic change in pluralistic organizations. Academy of Management Journal 44 4 (2001) 809-837
83. Lozeau D., Langley A., and Denis J.L. The corruption of managerial techniques by organizations. Human Relations 55 5 (2002) 537-564
84. For articles that show how multiple case studies can be analyzed see. Eisenhardt K.M. Building theories from case study research. Academy of Management Review 14 4 (1989) 532-550
85. Miles M.B., and Huberman A.M. Qualitative Data Analysis. 2nd ed. (1994), Sage Publications, Thousand Oaks
86. Research has suggested that relative power differences in terms of being the acquirer and the acquiree is a determinant of the implementation process, see for example. Ollie R. Shades of culture and institutions in international mergers. Organization Studies 15 3 (1994) 381-405
87. Cartwright S., and Cooper C. The impact of mergers and acquisitions on people at work: existing research and issues. British Journal of Management 1 (1990) 65-76
88. Studies that have tried to distinguish objectively mergers of equals from other M&As find that 0.05-3% of mergers fall into the category of equal or statutory mergers - see for example. Zaheer S., Schomaker M., and Genc M. Identity versus culture in mergers of equals. European Management Journal 21 (2003) 185-191 However, these studies use very strict measures such as 50/50 distribution of ownership, and in our sample we have allowed this to be somewhat more unbalanced (60/40 in the case of Merger B)
89. For a discussion of how multiple mergers are pursued, for example as a way to pursue a growth or internationalization strategy see. Côté L., Langley A., and Pasquero J. Acquisition strategy and dominant logic in an engineering firm. Journal of Management Studies 36 7 (1999) 919-952
90. An example of an article comparing the performance of Norwegian M&As to those of o ther countries is. Eckbo B.E. Bedriftsoppkjøp og verdiskapning (Acquisitions and value creation). In: Boye K., and Meyer C.B. (Eds). Fusjoner og oppkjøp (Mergers and Acquisitions) (1998), Cappelen Akademiske Forlag, Oslo 244-278