Improving the M&A success rate: identity may be the key

Abstract

Purpose

The purpose of this paper is to build a model of mergers and acquisitions (M&A) performance drawing from the concept of organizational identity theory. The paper proposes that successful performance of an M&A is dependent upon two things, namely, the alignment of the organizational identities of the two merging firms and the method used to integrate them.

Design/methodology/approach

This is a conceptual paper based on current research and uses multiple real-world examples of M&A to elaborate the proposed model and highlight scholarly and practical implications.

Findings

The paper explains that the similarity of the identities of the merging organizations has a significant impact on the performance of the combined entity. Furthermore, the integration method used by the merged firms influences the success of the merged entity. The use of an identity approach helps unravel new variables impacting M&A performance.

Research limitations/implications

A limitation of the paper is that it does not address how, over time, identity management can overcome the resistance of two merging entities. In addition to testing the proposed relationships, further research can explore these identity dynamics in unraveling an M&A performance.

Practical implications

This paper highlights the importance of evaluating identity as an element of an M&A due diligence. Practitioners should be aware of the dangers of signaling one identity integration strategy but using contradictory actions in implementation.

Social implications

Given the importance of identity in a variety of organizational outcomes, the paper is timely in integrating the organizational identity (OI) concepts in understanding M&A performance issues.

Originality/value

Given the importance of identity in a variety of organizational outcomes, the paper is timely in integrating the OI concepts in understanding M&A performance issues.

Citation

Joshi, M., Sanchez, C. and Mudde, P. (2020), "Improving the M&A success rate: identity may be the key", Journal of Business Strategy, Vol. 41 No. 1, pp. 50-57. https://doi.org/10.1108/JBS-08-2017-0115