Advances in Mergers and Acquisitions: Volume 8

Volume 8 of Advances in Mergers and Acquisitions brings together an international set of articles on topics to do with international mergers, the role of cultural distance and post-acquisition integration, employee attitudes and behavioural intentions during post-merger integration, culture fit and post-merger success, transitional governance and its link to implicit process assumptions, the effect of organizational complexity and post-merger integration and industry specific examples of the impact of merger and acquisitions (M&A). The contributors come from across the world: Denmark, Germany, Israel, Italy, The Netherlands, Singapore, United Kingdom and United States.

Empirical findings from the past 15 years suggest that the influence of culture on the integration process is critical. However, the interrelationships between corporate and national cultures and their influence on merger success are not clear, and the results of empirical studies are contradictory. The major objective of this chapter is to provide a framework that addresses the effects of cultural distance on various integration approaches, and thereby explain international merger and acquisition performance. The framework can assist managers of international mergers in analyzing, evaluating, and planning before the merger and in implementing the chosen integration approach after the merger.

Postmerger integration processes have been studied from the perspectives of organizational identity and organizational culture, but these two perspectives have rarely been integrated. We argue that organizational identification and organizational culture differences give rise to two different sets of individual responses that are both important, but for different types of outcomes. An empirical analysis of a large-scale merger between two service sector companies shows that identification with the postmerger organization positively relates to both behavioral intentions and key attitudinal variables. In contrast, our results show that perceived organizational culture differences are negatively related to attitudinal variables. The effect of perceptions of cultural differences on behavioral intentions is mediated by organizational identification.

An increasingly dominant theme of recent M&A research has been the issue of cultural compatibility and the notion of “culture fit” and its contribution to post-combination performance and integration (Cartwright, 2005). Hence, various methodologies, both qualitative and quantitative, have been applied to the M&A context to analyze the cultures of combining employee groups and the extent to which they share the same reality.

In the last few decades, narratives and stories have attracted the interest of organizational researchers and practitioners both as analytic tools and as a subject for study. This chapter explores the value of stories as a means of understanding culture, communicating values and ideals, promoting adaptive change, and developing cooperation and identification with the new merged organization. It illustrates the application of narrative methodologies within the context of a recent merger within the banking industry.

Transitional governance trajectories – i.e. trajectories in which an established firm first engages in equity collaboration with an entrepreneurial firm and subsequently acquires the entrepreneurial firm – are becoming an increasingly popular strategy for established firms to get access to novel and pioneering technologies. In this chapter, we critically assess the existing literature on transitional governance trajectories. In particular, we rely on insights from the existing alliance and acquisition literature to question three implicit assumptions (i.e. established partner is the dominant partner in transitional governance trajectories; established partner behaves as a passive financial investor during pre-acquisition collaboration and post-acquisition integration is likely to proceed smoothly) that are applied by existing studies on transitional governance. On the basis of this critical assessment, we identify theoretical, methodological and managerial challenges for future research on transitional governance.

We apply a contemporary approach to study the effect of organizational complexity on post-merger integration. A computational, virtual experiment was carried out to determine how the level of structural complexity, a characteristic of all formal organizations, impacts the dynamics of organization performance during the post-merger integration period. We found that performance during this period is affected by the pre-existing complexities of the two merging organizations; surprisingly, the organizations’ size was found to be only a marginally relevant factor, instead, the number of work groups had a greater consequence. Moreover, we found that the homogeneity tendencies of the actors may be the source of an upper constraint on the merged organization's performance. Consistent to these findings, we develop hypotheses for later empirical study. Broadly, this chapter puts forth computational modeling as a vital methodology for advancing mergers and acquisitions research; in addition, this chapter uncovers previously unpronounced, phenomenological discoveries that were found using this promising approach. Throughout this chapter, we endeavor to advance the broad use of computational modeling into the fore of leading-edge post-merger integration and related research and practice.

What is the academic community's contribution to the understanding of merger and acquisition (M&A) performance to date? Although there exists already a vast amount of theoretical as well as empirical studies aiming at explaining, predicting or understanding post-acquisition performance, there seems to be a growing dissatisfaction among scholars with the fragmented findings that have emerged to date. A possible explanation is that M&A scholars have mainly dealt with explaining the variance in M&A performance and have generally overlooked that contradictory findings are due to different measures of performance. This state of affairs is even more marked in the realm of technology-driven acquisitions, in that we find measures of both overall post-acquisition performance and post-acquisition innovative performance. Academics are therefore called upon to investigate what M&A scholars measure as post-acquisition performance in high-technology industries.

This chapter points toward a better understanding of M&A performance construct in high-tech settings through a review of existing empirical research of technology-based M&As within a broad range of scholarly journals. Findings present a fragmented state of affairs with a proliferation of operational definitions of post acquisition performance and a wide array of indicators. Moreover, different perspectives and time lags are accounted for.

This chapter examines the acquisition of assets (real estate) and companies in the Chinese real estate industry. We propose a nuanced view of state ownership (beyond state being the largest shareholder) and argue that firms with a combination of state and private ownership may be in a unique position to acquire real assets. We conduct an analysis of the growth and funding of the industry for the period and also analyze the successful acquisitions in the industry over 2004–2007. Our analysis is supportive of the nuanced view about state-owned enterprises (SOEs) and their advantageous position for acquiring real estate assets from the government. Our analysis also sheds light on the two-stage marketization process in the Chinese real estate industry where SOEs endowed with real estate assets are sold to non-SOEs.

This chapter analyses the moves global brewery companies undertake towards the distribution of decision-making authority in their multinational organization and the likelihood of newly acquired subsidiaries to influence these moves. In this consumer goods industry, brands are suggested to be the primary subsidiary-specific resource to influence these distribution processes. Empirically, this chapter explores three European acquisitions of the Dutch brewery corporation Heineken in Switzerland, Slovakia, and France. We explore whether differing brand value (regional/international, standard/premium) has had an impact on the subsidiaries’ ability to maintain a certain degree of decision-making authority after the take-over. The results of our case studies show, however, that the ownership of valuable brands may not be considered as a critical resource for subsidiaries here.