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Why do managers continue to transact merger & acquisition (M&A) deals, in massive number and dollar terms, when so many are deemed to fail? This paradox is central to the study of M&A. Despite considerable research effort being devoted to refining and redefining assessments of M&A performance the consensus of opinion remains that most M&A fail. Certain of the high percentage of M&A failure, performance academics infer that the continued massive levels of transactions can only be explained as misguided actions by managers. This chapter believes that the performance paradox can begin to unravel if we move beyond simple inference of managerial intentions and observe what actually takes place in practice. For instance the underlying assumptions of performance academics, that; 1) each M&A must create greater value for acquiring shareholders; 2) no other reasons for an M&A are legitimate, are not adequate for capturing ‘legitimate’ managerial action in practice. This suggests that part of the reason for so many M&A appearing to be failures is a result of the ‘myopia’ of performance studies themselves, where assumed and simplified motives have resulted in crude categorisations and confounded data. These limitations in the M&A performance literature are addressed in this chapter by; 1) demonstrating a broader set of motivations for M&A; 2) establishing their legitimacy; 3) showing that motivations may not be singular in nature but intertwined and complex; 4) presenting a way in which this greater complexity may be conceived in order for more sensitive empirical tests to be performed.

While Merger & Acquisition (M&A) activity has reached unprecedented levels over recent years, M&A failure rates remain high. Yet, there is growing evidence that private equity funds show high success rates. As little is known about the differences between different types of buyers, and only scant information exists on private equity funds’ operations, we inductively explore the reasons for their outperformance. In this qualitative study, we identify three characteristics (i.e., organizational set-up, private equity investors’ professional identities, and an integrative work approach), which we brought together into a theoretical framework that explains how private equity professionals can enable better M&A performance. Finally, our findings underline the effectiveness of specific incentivization approaches applied in private equity funds.

A model focusing on the role of the individual in national and corporate culture clash situations, during post-merger integration, is presented. The theory of psychological contract is adapted to explain different individual expectations in domestic versus international mergers and acquisitions (M&As). It is proposed that expectations on the part of both parties to the merger can act to moderate the effects of culture clash in M&As on acquired management attitudes and behavior, and thereby influence post-merger turnover and integration success. Thus, the model explains the inconsistencies of empirical findings about the different effects of national versus corporate cultural differences on M&A performance. The implications of these ideas for research and practice are discussed.

Principal component (PC) techniques are commonly used to improve the small sample properties of the linear instrumental variables (IV) estimator. Carrasco (2012) argue that PC type methods provide a natural ranking of instruments with which to reduce the size of the instrument set. This chapter shows how reducing the size of the instrument based on PC methods can lead to poor small sample properties of IV estimators. A new approach to ordering instruments termed ‘normalized principal components’ (NPCs) is introduced to overcome this problem. A simulation study shows the favourable small samples properties of IV estimators using NPC, methods to reduce the size of the instrument relative to PC. Using NPC we provide evidence that the IV setup in Angrist and Krueger (1992) may not suffer the weak instrument problem.

Strategic decisions leaders make involving organizational changes such as mergers and acquisitions (M&A), divestitures, and downsizing, which can influence and/or interact with other organizational factors. For example, within the context of M&A, changes impact financial performance, firm behaviors, and organizational culture. In addition, strategic decisions for these types of change can also interrelate with other more intrapersonal factors, including both leaders’ and employees’ health and well-being. Employee stress, also referred to as “merger syndrome,” outlines individual negative impacts of the changes including, but not limited to, cynicism and distrust, change wariness, and burnout, all accumulating to psychological effects including increases in detachment to work, stress, and sick leave. In this chapter, the authors outline the different impacts M&A phases have on stress and well-being and how they interrelate with the strategic decisions leaders make. The authors also outline future research opportunities and practical implications for how leaders and employees could better manage future major changes such as M&A activities.

I review the burgeoning literature on applications of Markov regime switching models in empirical finance. In particular, distinct attention is devoted to the ability of Markov Switching models to fit the data, filter unknown regimes and states on the basis of the data, to allow a powerful tool to test hypotheses formulated in light of financial theories, and to their forecasting performance with reference to both point and density predictions. The review covers papers concerning a multiplicity of sub-fields in financial economics, ranging from empirical analyses of stock returns, the term structure of default-free interest rates, the dynamics of exchange rates, as well as the joint process of stock and bond returns.

The primary purpose of this chapter is to offer a conceptual/theoretical understanding of post-M&A integration rationales and/or actions which pose a challenge to acquired firm customers in acquisitions of knowledge-intensive firms, and thus trigger M&A value destruction. The approach takes the form of a literature overview and conceptual development. As a step toward developing a more elaborate understanding of a customer-centered perspective, this conceptual study identifies five key factors that may lead to value leakage/destruction for acquirers’ of knowledge-intensive firms. Specifically, it identifies acquisition motive, specific acquired firm employees other than the engineers and scientists, size of the acquired firm customer-base, M&A customer compatibility, and the acquirer’s own customers’ behavior as integration rationales and/or actions which pose a challenge to acquired firm customers. In addition, the chapter offers a theoretical framework that serves as an analytical tool, and can thus be used as a foundation for future empirical work on analyzing acquirers’ destruction of value in knowledge-intensive acquisitions through the neglect of acquired firm’s customers. This study does not claim to have provided exhaustive list of all factors regarding acquirer’s integration rationales and/or actions that influence acquired firm customers. Nonetheless, for researchers seeking to build a more comprehensive framework relating to the impact of acquirer’s integration rationales and/or actions on acquired firm’s customers, this framework may serve as a solid foundation for achieving that goal. For practitioners, this study points to the importance of knowledge held by acquired firm customers and the need to maintain such customer relationships in order to avert acquirer’s post-M&A value destruction. In addition, acquirers may also recognize that post-M&A integration changes required following M&A should not be restricted to only the firm’s internal activities and resource deployment but should extend to how the firm interacts or relates with other external value creation actors. This chapter contributes by highlighting and stimulating a discussion on the important role of acquired firm customers in acquisitions of knowledge-intensive firms in informing our understanding of the sources of M&A value leakage/destruction.