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Synergy management pitfalls in mergers and acquisitions

Raffaele Fiorentino (Department of Accounting, Management and Economics, University Parthenope, Naples, Italy)
Stefano Garzella (Department of Accounting, Management and Economics, University Parthenope, Naples, Italy)

Management Decision

ISSN: 0025-1747

Article publication date: 17 August 2015

7280

Abstract

Purpose

The purpose of this paper is to advance a conceptual comprehensive framework to analyze synergy management pitfalls in mergers and acquisitions (M & As). The framework highlights the main dimensions of synergy management, the most relevant synergy pitfalls and the ways to overcome them.

Design/methodology/approach

A greater recognition of synergy management literature in M & As is developed. A framework is provided integrating the compatible elements of previous broad areas of research and the main findings of studies on several topics related to synergy.

Findings

Prior literature has suggested that synergy is an important motivation of M & As, has tended to be overestimated and has been difficult to achieve. Specifically, there are three relevant synergy pitfalls: the “mirage,” a tendency to overestimate synergy potential, the “gravity hill,” the underestimation of the difficulties in synergy realization and “amnesia,” a dangerous lack of attention to the realization of synergy. An effective synergy management requires an analysis of five dimensions: the steps of the M & A process, the several values of synergy, the forbidding effects of poor synergy management, the potential causes of synergy inflation and the selection of solutions to synergy pitfalls.

Practical implications

The comprehensive framework suggests insights and guidelines to help managers to overcome pitfalls in synergy management. Managers will learn the following lessons: “when” pitfalls should embrace synergy management; “where” pitfalls may occur; “why” pitfalls may occur; “what” consequences can result in a value of “realized synergy” lower than the “expected synergy”; and “how” actions, tools and behaviors can overcome hidden dangers in synergy management.

Originality/value

The study changes the focus from a single, generic synergy trap to three more analytical, useful synergy pitfalls: the mirage, the gravity hill and the amnesia. By shedding light on synergy management pitfalls, this paper enriches M & A literature and enhance practical solutions to reduce pitfalls in synergy decision making.

Keywords

Citation

Fiorentino, R. and Garzella, S. (2015), "Synergy management pitfalls in mergers and acquisitions", Management Decision, Vol. 53 No. 7, pp. 1469-1503. https://doi.org/10.1108/MD-12-2014-0692

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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