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Mergers and acquisitions (M&A) are arguably one of the CEOs greatest challenges, and there is a critical need to get these decisions right. It is clear that no single theory is adequate to describe or inform how M&A are evaluated in uncertain conditions, but there are several that offer partial explanations or at least contribute toward our understanding of how managers can deal with the uncertain environment and assess the likely risks associated with M&A. The literature suggests how relevant theories might be aggregated to make sense of strategic investment decision and investment appraisal techniques in an organizational context and considers the implications for further research in this important area of M&A. This chapter focuses on strategic investment appraisal, and draws together a variety of theoretical perspectives, especially from the field of psychology, which may be unfamiliar to both scholars in and practitioners.

Surveys of capital budgeting practices in the UK and USA reveal a trend towards the increased use of more sophisticated investment appraisals requiring the application of discounted cash flow (DCF) techniques. Several writers, however, have claimed that companies are underinvesting because they misapply or misinterpret DCF techniques. Such claims have been made on the basis of observations in only a few companies, or anecdotal evidence, without any supporting statistical evidence. Reports on a recent survey conducted by the authors which suggests that many UK firms are guilty of misapplying DCF techniques. Also provides evidence relating to some issues that have not been thoroughly examined in previous studies, namely the impact of company size and the relative importance that firms attach to different investment appraisal techniques.

This paper aims to examine the adoption of conventional and emergent analysis techniques in Strategic Investment Decision-Making (SIDM) practices in large UK manufacturing companies. It aims to update the current knowledge on SIDM practices in large manufacturing companies. The research question underlying this study: Are recently developed analysis techniques (i.e. those that aim to integrate strategic and financial analyses) being used to evaluate strategic investment projects?

The research evidence underpinning this study was made up of primary and secondary data, quantitative and qualitative. Firstly, a survey consisting of a mailed formal standard questionnaire was conducted where each respondent is required to answer the same questions based on the same system of coded responses. Secondly, qualitative data was collected using the annual reports of selected companies. Disclosures were used as supplementary source of information using the explanatory notes and parenthetical disclosures accompanying companies’ financial reporting. Sources for these disclosures included management discussions, analyses of company strategy and risk and forward-looking reports regarding future performance and growth opportunities (such as mergers and acquisitions activities). Accordingly, companies’ disclosures were used in this study as an alternative method to semi-structured interviews to collect qualitative data. More recently, companies such as Rio Tinto have prepared strategic annual reports for 2017 against the UK Corporate Governance Code (version 2016).

The choice and use of financial analysis techniques and risk analysis techniques depend on the type of project being evaluated. Decision makers in large UK companies do not appear to use emergent analysis techniques widely. Pre-decision control mechanisms have significant influence on SIDM practices. This includes the changes of internal and external contextual factors, including organisational culture, organisational strategies, financial consideration, comprising formal approval governance mechanisms, regulatory and other compliance policies interact with companies’ internal control systems. Companies incorporate non-financial factors alongside quantitative analysis of strategic investments opportunities. Energy efficiency and carbon reduction are key imperatives of companies’ environmental management. These factors viewed by decision makers as significant factors relevant for compliance with legislation as well as maintaining companies’ legitimacy issues, sustainable business, experience with new technology and improved company image.

High risk, ambiguity and complexity are key characteristics embedded in SIDM processes. Macroeconomic issues remain crucial factors in scanning and screening investment opportunities, as reported by this study. The early stage of SIDM processes requires modelling under macroeconomic scenarios and assumptions of both internal and external parameters. Key assumptions include: projections of economic growth; commodity prices and exchange rates, introduction of technological and productivity advancements; cost and supply parameters for major inputs. SIDM practices rooted on comprehensive knowledge and experience of the industry and markets to draw subjective judgements about the riskiness of prospective projects, but these are rarely formalized into their SIDM processes. Findings of this study, however, remain within the context of UK companies. This study has its own limitations due to its time, location, respondents and sample selection, the size and the sector of the selected companies and questions addressed. Findings of this study raise a call for future research to examine SIDM processes in different settings to explore the relative impact of various organisational control mechanisms on SIDM practices. Also, to examine the influence of contextual factors (such as national culture, political, legal and social factors) on organisational control mechanisms. SIDM practices and processes have received significant attention from researchers, yet there is a lack of evidence in the literature about how companies approach strategic decision-making regarding divestments of some of their strategic investments. This type of strategic decision-making is not less important than other types of SIDM practices.

SIDM practices reflect the art and science of steering and controlling organisational resources to achieve a desired strategy. To understand the factors that shape SIDM practices and align them to organisational strategy, more attention is required to the choice and design of pre-decision controls and to the important role of strategic management accounting tools over the more traditional financial analysis techniques that have formed the focus of much prior empirical research.

Key environmental issues viewed by decision makers as significant factors relevant for compliance with legislation as well as maintaining companies’ legitimacy issues and company image.

Despite their perceived importance in this study, quantitative accounting controls may fail to connect with the kind of investment decision-making required to bring strategic success. Indeed, it has been widely noted that financial evaluation techniques are inadequate for assessing strategic investment proposals; they can only function as a guideline, as SIDM practices involve so many uncertainties, risks and judgements. A key insight from this study is that the achievement of integration between the firm’s strategic investment projects and the overall organizational strategy forms a critical pre-decision control on managerial behaviour at an early stage in SIDM practices. As many strategic investment decisions are one-off, non-repeatable decisions, the information needed to support their evaluation is likely to be similarly unique. Sound SIDM practices require the support of a large amount of varied information, a significant proportion of which is collected and analysed prior to potential capital investment projects being considered, such as information related to strategic goal setting, risk-adjusted hurdle rates and the design of appropriate organisational decision hierarchies.

This paper aims to examine how capital investment projects are appraised in Lebanon; whether the risk is incorporated into this process by Lebanese firms and the impact of political risk on the capital budgeting process.

This paper uses a questionnaire survey to investigate the capital budgeting practices of companies located in Lebanon, which is a country characterised by a high level of political risk.

Lebanese companies tend to use more than one method of investment appraisal and, increasingly, they are using sophisticated discounted cashflow techniques alongside the payback period. The most widely used methods to evaluate risk include scenario and sensitivity analysis. Finally, political risk plays an important role in the capital budgeting processes of Lebanese companies.

The paper reports on whether the methods of capital investment appraisal used throughout advanced Western economies are used in the context of an emerging economy. In addition, Lebanon is an ideal research site to study capital budgeting as the conflicts in the country of the past 50 years have required sizeable new expenditure on capital projects; the country is characterised by high levels of political risk which may lead corporate managers to use different approaches to investment appraisal and it provides an opportunity to study capital budgeting decisions by private, unlisted firms.

This paper aims to investigate the flexible decision pathways adopted by development advisors in the management of uncertainty in property development. Specifically, the study examines the quantitative techniques adopted by development advisors, the level of adoption of real options analysis (ROA) vis-à-vis the level of adoption of heuristics. Finally, the types of options exercised in property development were analysed. This was with a view to providing information that could mitigate the challenges of risk and uncertainty and increasing investment failure associated with property development in Nigeria, an emerging market.

The study adopted a survey method and was conducted on development advisors in property development companies/estate surveying and valuation firms in Nigeria. A total of 195 development advisors participated in the survey. The respondents were required to rate, on a five-point Likert scale, the level of adoption of the quantitative models, heuristics and the types of flexibility exercised during development. The data were analysed using mean rating, one-sample t-test and analysis of variance.

The results revealed that there was a preference for the use of traditional techniques, while probabilistic appraisal models and other contemporary methods such as ROA are seldom adopted by development advisors. While there was a significantly high level of adoption of heuristics, the stratified analysis examining the profile of the respondents and the level of adoption of ROA and heuristics suggests that years of experience influenced the level of adoption of both the ROA and heuristics by the development advisors. The analysis of the types of flexibility showed that staging/phasing and changing the initial use/design were the most prevalent flexibility pathways adopted during the development. However, the study found that there was no significant difference concerning the choice of flexibility being adopted by development advisors who used ROA and those who did not.

The study provides an understanding of the decision pathways adopted by development advisors in an emerging market like Nigeria.

The paper contributes to studies on decision-making pathways in the management of uncertainty under dynamic conditions by development advisors in emerging markets.

The impact of accelerating technological change in recent years has been to shorten the useful lifespan of many commercial buildings. Shorter income flows and increasing yields have resulted in a rapid descent towards site values. The response to changing investment circumstances such as this will first be reflected in the subjective investment appraisal, which will precede changes in reactive market valuation methodology. This paper presents and compares three alternative methods of appraisal which might allow explicit analysis of building depreciation. Treating the building element of property as a wasting asset akin to a leasehold is rejected for its simplistic assumptions and lack of flexibility. A cost based approach is similarly flawed. The recommended approach is an explicit cash flow projection which reflects the fact that rental growth will decline over a holding period, considering alternative resale prices based upon site value, value for refurbishment, or value if re‐let unimproved.

Provides an indication of the results of a large‐scale survey of the application of investment valuation techniques to the reversionary freeholds in UK practice. Identifies trends in the use of methods in practice for both market valuation and analysis of worth/price purposes. Concludes the use of growth explicit techniques is confined to the analysis role and that the conventional term and reversion approach to market valuation is being supplanted by equivalent yield and layer methods.

The purpose of this paper is to investigate equity appraisal techniques employed by non‐professional investors from the Central European emerging stock market (CEESM) of Poland. The paper examines investment decision‐making processes in the context of the current financial crisis in a pioneering attempt to shed some light on crisis‐induced changes in investment strategies. In addition, the study tests the usefulness and predictive abilities of analytical tools employed by non‐professional investors when faced with unstable stock‐market conditions.

Questionnaires and experiments conducted with a large group of Polish investors – trading equities in their home market – in order to gain information on the most commonly used investment strategies. Their views are contrasted with similarly obtained opinions expressed by UK non‐professional investors to highlight differences in approaches to investments. Finally, a series of semi‐structured interviews was conducted to discuss how the current financial crisis has affected investment strategies among Polish and UK investors.

Technical analysis (TA) is the preferred tool utilized by non‐professional investors in Poland. However, the current financial crisis caused the majority of Polish practitioners to adopt fundamental analysis which, in this case, is undertaken to support initial conclusions derived from TA. At this point, investees' financial statements coupled with analyses of the main macroeconomic indicators for CEESMs became the main source of decision‐influencing information.

The paper addresses an area which is gaining in importance and is of interest to both practitioners and service providers for non‐professional investors. Further investigation is recommended of nascent challenges to investing in CEESMs with practical implications for policy makers and investors.

The current paper refers to the global financial crisis which occurred in the years 2008‐2010. To date, there are no previous studies devoted to an investigation of how investors' trading strategies were influenced by the international financial crisis. Moreover, there are relatively few studies which target practitioners from CEESMs. The paper focuses on the non‐professionals, as this group of investors seems to be relatively under‐researched. Therefore, a number of important implications can be drawn from the current paper with regard to investment strategies tailored to overcome a financial crisis.

Until recently little attention has been given in Accounting and Finance literature to the problem of linking the results of financial evaluation techniques such as Net Present Value (NPV) and Shareholder Value Analysis (SVA) to managers’ cognitive evaluation of strategic factors and the risk profile of projects. Various authors have called for research in this area, but very little has so far been published. This paper reports on a field‐based study carried out in the logistics industry. It builds on earlier research, which elicited constructs that managers use to assess project risk using a repertory grid technique. It provides an insight into how a project risk analysis process can be linked with project returns in strategic investment appraisal (SIA) in a divisionalised organisation. An action research approach was taken to develop a decision matrix to link the risk assessment results to expected project returns as an aid to management in strategic investment decision‐making. It is now embedded in the investment appraisal procedures across the European group of companies that participated in the research. It is suggested that the framework adopted in this experimental study is transferable to other organisational contexts.

Robotic process automation (RPA) has recently emerged as a technology focusing on the automation of repetitive, frequent, voluminous and rule-based tasks. Despite a few practical examples that document successful RPA deployments in organizations, evidence of its economic benefits has been mostly anecdotal. The purpose of this paper is to present a step-by-step method to RPA investment appraisal and a business case demonstrating how the steps can be applied to practice.

The methodology relies on design science research (DSR). The step-by-step method is a design artefact that builds on the mapping of processes and modelling of the associated costs. Due to the longitudinal nature of capital investments, modelling uses discounted cashflow and present value methods. Empirical grounding characteristic to DSR is achieved by field testing the artefact.

The step-by-step method is comprised of a preparatory step, three modelling steps and a concluding step. The modelling consists of compounding the interest rate, discounting the investment costs and establishing measures for comparison. These steps were applied to seven business processes to be automated by the case company, Estate Blend. The decision to deploy RPA was found to be trivial, not only based on the initial case data, but also based on multiple sensitivity analyses that showed how resistant RPA investments are to changing circumstances.

By following the provided step-by-step method, executives and managers can quantify the costs and benefits of RPA. The developed method enables any organization to directly compare investment alternatives against each other and against the probable status quo where many tasks in organizations are still carried out manually with little to no automation.

The paper addresses a growing new domain in the field of business process management by capitalizing on DSR and modelling-based approaches to RPA investment appraisal.