Advances in Mergers and Acquisitions: Volume 10

Table of contents

(15 chapters)
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List of Contributors

Pages vii-viii
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Introduction

Pages ix-xi

The Advances in Mergers and Acquisition series is now in its 10th year, and there are no signs of abatement in the scale of mergers, acquisitions, joint ventures, and other strategic partnership arrangements. Indeed, given the recession and the slow growth in many countries throughout the world, there is an increase in the rationalizing of many sectors within various countries and cross-national boundaries. Given the high failure rate of these, in the sense that two plus two tends not to equal five but less than four, the appetite to learn more about what works and what doesn’t is strong.

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In this chapter, we want to draw merger and acquisition scholars' attention to the variety of settings investigated under the generic label “M&As”. We seek to answer the following question: “What are the study objects that mergers and acquisitions scholars actually investigate and refer to with the generic label ‘M&As’?” We will achieve this aim by conducting a detailed analysis of existing empirical research published in management journals. Through our analysis, we wish to contribute to the existing literature by examining the complexity and ambiguity behind the label “M&As”, and exploring the variety of research settings where management scholars have, thus far, used it to measure merger and acquisition performance. By doing so, we will raise scholars' awareness of the importance of defining the scope conditions where the merger and acquisition performance construct does or does not apply.

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Organisational commitment has been studied for several decades. Research on the human resource side of mergers and acquisitions has typically emphasised the human resource ‘problems’ related to integration, such as low motivation, increased dissatisfaction, low commitment and performance, stress, leadership and power struggles, and high employee turnover. However, there is scant research on organisational commitment in the context of acquisitions. Yet, based on prior research, organisational commitment is important in terms of employee retention, commitment to change and post-acquisition performance. The model developed in this chapter explains what influences organisational commitment in acquisitions and how to build organisational commitment towards the acquirer. A number of propositions are derived from the model, and the implications for M&A research and practice are discussed.

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The social identity approach has been dominant in describing the main psychological processes that come with mergers. The main storyline of social identity processes includes the aim of a positive self-concept, the categories that define oneself, and how these categories help to make sense of a particular situation. Three studies are reviewed that provided nuances to this storyline through combining the social identity approach with the sensemaking approach. In these cases, the organization members –so to speak – improvise on the standard script of the social identity approach in the ways they made sense of the merger and how they responded. The consequences of such a mixture of social identity and sensemaking approaches for managing mergers are discussed in terms of sensemaking, sensegiving, sensebreaking, and sensehiding.

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This theoretical research endeavors to find common ground in the ostensibly inconsistent results of studies on the impact of cultural similarities and differences on strategic partnerships. Some findings suggested that partners have to possess similar cultural characteristics in order to achieve success, while others showed that cultural distance had a positive effect on efficiency and the competitiveness of partnerships. I systematically analyze the equivocal evidence of influence of both commonalities and differences on partnerships' outcomes, highlighting conditions under which they can be either beneficial or dysfunctional. Several propositions are formulated in regard to the role of qualitative and quantitative differences in both organizational and national cultures. Further, the theoretical and practical implications are also discussed.

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Management researchers and practitioners point out that integration processes during the post-merger integration period are critical to synergistic effects and performance of the merged companies over time. However, the relation between the post-merger integration process, synergy potential exploitation, and its influence on M&A deal success, especially in the case of international M&A, is not clear. Moreover, the results of empirical studies are inconsistent and even contradictory. This chapter adds to the existing body of knowledge by developing a model, based on the analysis of the acquisition by Teva Pharmaceuticals of the Hungarian Biogal and of the Dutch Pharmachemie. The model addresses the key factors such as the effect of corporate culture differences, and synergy potential between the acquiring and acquired firms on the international M&A performance.

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The main aim of this chapter is to review the use of accounting-based measures of merger and acquisition (M&A) performance. To do so, we conducted a keyword search in 28 leading management journals and one edited book (i.e., Advances in Mergers & Acquisitions). To complement our review, we draw on very recent literature reviews of M&As (e.g., Haleblian, J., Devers, C. E., McNamara, G., Carpenter, M. A., & Davison, R. B. (2009). Taking stock of what we know about mergers and acquisitions: A review and research agenda. Journal of Management, 35(3), 469–502; Kolev, Haleblian, & McNamara, 2012; Meglio, 2009). Results indicate that accounting-based measures of performance have been used in 36 studies. Also, in these studies, there exists much heterogeneity with respect to the operationalization of M&A performance, the time lag, and the level of analysis. Next, the chapter proceeds with the discussion of the advantages and disadvantages of accounting measures and the proposition of four substantive priorities for future research in the area.

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Declining productivity and disappointing lack of profitability after three decades of biotechnology commercialization, despite enormous investment and the great promise of breakthrough solutions, have led researchers to question whether traditional horizontal acquisition strategies result in superior firm performance. Our chapter explores the answer to this question as well as to the role that disclosure plays in this important emerging industry. Using standard event study methodology, we examine differences in market performance of vertical versus horizontal acquisition strategies, along with the role played by the amount of information disclosed in the announcement. Our results suggest that vertical acquisitions underperform horizontal acquisitions, with the amount of disclosure playing a role in the market's ability to react to a firm's acquisition strategy accurately and quickly. Our results suggest that accountants who have called for additional disclosure, especially in complex industries such as biopharma, are correct in assuming that nonfinancial information plays a significant role in investors’ valuation of an acquisition event. Managers of biopharma firms, however, are cautioned that more disclosure, through the reduction of uncertainty, may result in lower market valuations for acquirers.

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The metaphor of marriage is frequently invoked in the context of mergers. The evidence is that the success rate for marriages is low and even worse for mergers. In this chapter we explore why mergers often fail to meet the expectations of either party and bring to bear insights from the relational field of marriage counselling to the challenge of achieving cultural development in the wake of a merger. Based on our experience of leading the cultural aspects of a major global merger, we propose some practical methods to help leaders create the conditions for a ‘lasting and happy marriage’.

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This chapter offers a conceptual and theoretic introduction to a contemporary view of the post-merger integration (PMI) challenge: it places the organizational-members’ internal social network at the focal point. An original viewpoint is presented in this chapter – the thinking is novel to integration literature and thought, and to social networks – that advances both research and practice of PMI. Since the network-view may be a new topic to many PMI researchers, the central discussion is preceded by a brief introduction to the concepts and techniques of social network analysis. The author offers that the organizational members’ pre-existing social network can become disrupted by integration processes, which creates pressures on the individuals’ previously stable social network. The individual members will therefore strive for a re-stabilization of their localized social network towards a specific pattern that is somewhat unique to each individual. During this social realignment there is an opportunity for integration managers to embrace this “social reconciliation.” By recognizing the individuals’ imminent stabilization point of this natural process, integration managers can proactively guide the social network toward an optimal, or productive, resting space that provides organizational benefit. This chapter puts forward the particulars of this phenomenon and offers exploratory suggestions for how a practitioner might influence the re-establishment of the organizational social network in a manner consistent with individuals’ preferences and simultaneously beneficial to the organization overall. Recommendations for follow-up research are provided.

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DOI
10.1108/S1479-361X(2012)10
Publication date
Book series
Advances in Mergers & Acquisitions
Editors
Series copyright holder
Emerald Publishing Limited
ISBN
978-1-78052-196-1
Book series ISSN
1479-361X