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Article
Publication date: 15 March 2019

Yao Cheng

The purpose of this paper is to examine the effects of the post-merger integration duration on acquiring firms’ leverage behavior before and after a merger, using a…

Abstract

Purpose

The purpose of this paper is to examine the effects of the post-merger integration duration on acquiring firms’ leverage behavior before and after a merger, using a dynamic model in which full merger benefits cannot be consumed at the instant of a merger, but rather after a pre-specified post-merger integration period.

Design/methodology/approach

This paper presents a dynamic model and empirical tests that describe the impact of the post-merger integration period on the capital structure dynamics of the acquiring and target firms before a merger and during the post-merger integration period. By incorporating costs associated with the post-merger integration period, the model can provide new implications for the leverage behavior around the merger.

Findings

The model generates new implications related to acquiring firms’ leverage dynamics along with method of payment choice. Specifically, the model indicates that the post-merger integration duration is negatively associated with the market leverage of newly-merged firms at the time of merger completion and during the integration period. Further, acquirer managers are more likely to use equity to finance a merger when the integration duration is likely to be lengthy.

Originality/value

This is the first model in the literature that assumes that both the acquiring and the target firms can change their capital structure overtime, which allows us to analyze both the financing structure and the merger timing. Previous empirical studies also ignore the integration period in the analysis of the method of payment choice and leverage behavior around mergers. In the tests reported in this paper, the authors control for the factors mentioned above and demonstrate that the expected integration duration is not subsumed by those variables implying that it has its own power in explaining the choice of leverage and merger financing method.

Details

Pacific Accounting Review, vol. 31 no. 2
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 6 July 2015

Aihie Osarenkhoe and Akmal Hyder

A review of extant literatures shows that most mergers fail during the integration process. Little is known about how the realization of operating synergies and…

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2638

Abstract

Purpose

A review of extant literatures shows that most mergers fail during the integration process. Little is known about how the realization of operating synergies and dissemination of available know-how in the merged firm are managed in the post-merger phase. The purpose of this paper is to provide insights on the process of integrating operating synergies by focusing on the critical success factors that facilitate integration of the skills of merged banks.

Design/methodology/approach

The authors draw on three research traditions in merger literature and reconcile them with three dimensions of integration. In-depth interviews were conducted with Nordea managers from four Nordic countries.

Findings

Having learned from the mistakes of previous mergers, Nordea’s “guiding star” for managing its post-merger integration process was expressed as focus, speed and performance from top management. A hands-on leadership style, vision-led thinking, a bias for action, involvement of the entire staff, continuous focus on customers, open and honest communication with employees are critical to success.

Practical implications

The motive for a merger has an important impact on the degree of interaction and degree of integration. The authors expand on previous findings by, among other things, synthesizing three theoretical lenses into an integrative model, and addresses post-merger issues with a sharp eye towards clear managerial relevance.

Originality/value

The authors respond to the call to expand inter-firm relationships study beyond the narrow dyadic relationship focus and not solely conceptualize mergers as one of companies’ entry modes to implement mechanistic growth strategy. The three dimensions of integration imbued with three research traditions in merger literature provides us with a conceptual lens to conceive mergers also as engines for change emerging from the merged firms to enhance a bespoke performance of their business process.

Details

Business Process Management Journal, vol. 21 no. 4
Type: Research Article
ISSN: 1463-7154

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Article
Publication date: 3 August 2012

Harold Schroeder

This article intends to provide guidance to HR professionals and others involved in the planning and implementation of post‐merger integrations. It seeks to argue that…

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1484

Abstract

Purpose

This article intends to provide guidance to HR professionals and others involved in the planning and implementation of post‐merger integrations. It seeks to argue that successful integration requires an “art and science” based approach to organizational change, and to illustrate the importance of this approach by drawing on a case study project from the financial services sector.

Design/methodology/approach

Using a case study approach, the article describes key learnings from a financial services sector post‐merger integration project in which the author was directly involved. The problems and challenges that arose in the case study organization are described, and it is shown how these were addressed using the “Art and Science of Transformation”TM conceptual approach to achieve a successful integration.

Findings

In the case study project, a lack of detailed integration plans and the absence of integration performance metrics, as well as inadequate understanding of the likely impact of cultural incompatibilities, were identified as representing risks to successful merger. To mitigate these risks, an art‐ and science‐based approach was implemented. This included the development of an integration performance measurement system and a communications strategy, while a phased approach was taken to the integration. Use of the art and science approach to post‐merger integration helped contribute to a financially and operationally successful merger, despite the early risks and the contrasting corporate cultures involved.

Research limitations/implications

The article is based on a single case study from the Canadian financial services sector, and is written from the perspective of the author, who worked on this project as an external consultant. The specific types of problems and challenges relating to post‐merger integration will vary between organizations and sectors, but the examples discussed in this article are believed to be typical, and of value in demonstrating the importance of an art and science approach to post‐merger integration.

Practical implications

Post‐merger integration represents just one form of organizational change, and the “Art and Science of Transformation” approach is equally relevant and valuable to other types of projects. The evidence from previous research is that a high percentage of organizational transformations fail to meet their objectives or are abandoned before completion, with project failures most often due to a lack of attention to people‐related factors. By adopting the approach discussed in this article, organizations can help to reduce the risk of failure by achieving a good balance between the art and the science of change.

Social implications

Unsuccessful organizational change initiatives are wasteful of financial and human capital resources, and may result in demoralized employees – especially if they feel that their experience and skills are not being effectively utilized in the change initiative. The Art and Science of Transformation approach helps ensure that organizational change initiatives build efficiently and effectively on available human and other organizational resources to achieve positive outcomes.

Originality/value

The Art and Science of Transformation framework was developed by Schroeder & Schroeder Inc. on the basis of its experience of helping organizations achieve successful change. Although other studies have examined the factors associated with successful post‐merger integration using a case study approach, the application of this framework to the post‐merger integration context is unique.

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Article
Publication date: 15 January 2020

Yao Ma and Jiahua Xu

The purpose of this paper is to hone in on the degree of segment-level integration relative to corporate post-merger performance.

Abstract

Purpose

The purpose of this paper is to hone in on the degree of segment-level integration relative to corporate post-merger performance.

Design/methodology/approach

The sample consists of 89 segments in 29 combined companies resulting from large mergers and acquisitions (M&A) transactions between 2001 and 2014 in the pharmaceutical and chemical industries worldwide. The authors track the change through M&A in performance of segments with different integration forms as well as performance of entire companies with different integration levels.

Findings

The authors find that integrating the segments from the target significantly improves the acquirer’s overall performance, as well as the concerned segments’ performance, following an M&A transaction. Whereas the segments from the target company, when left unintegrated, not only exhibit subpar performance among all the segments, but also appear responsible for the worsening corporate performance. Various possible reasons for this contrast are discussed.

Originality/value

This paper raises awareness of the significance of segment-level analyses, and contributes to the post-merger integration (PMI) research by examining the influence of structural integration on operating segments. To the best of our knowledge, this paper is the first to investigate integration forms and the post-merger financial performance of various segments within companies.

Details

Journal of Organizational Change Management, vol. 33 no. 1
Type: Research Article
ISSN: 0953-4814

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Article
Publication date: 1 June 2005

Ravi Chanmugam, Walt Shill, David Mann, Kristen Ficery and Bill Pursche

To illustrate the importance of speeded up merger integration process that creates value part of the M&A lifecycle.

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7529

Abstract

Purpose

To illustrate the importance of speeded up merger integration process that creates value part of the M&A lifecycle.

Design/methodology/approach

This paper relies on recent case studies, client work and a survey.

Findings

Mergers that create maximum value treat the transaction as a complete lifecycle – beginning with pre‐deal strategy, progressing through deal execution and continuing with post‐merger integration. Most successful merger and acquisition (M&A) transactions are characterized by the superior execution of an explicit value‐capture strategy, which we call the “life‐cycle approach.” To achieve this, top managements in the most successful transactions have relied on four key principles: treat M&A as a holistic process; focus on value creation, not just integration; accelerate merger planning and execution; and use culture as a value‐creation tool.

Practical implications

Companies which already have an in‐built M&A capability, will adopt new best practices in merger integration that treat post‐merger integration earlier in the M&A process.

Originality/value

For companies who have an active M&A growth strategy, a speeded up merger integration allows for the early capture of M&A deal value.

Details

Journal of Business Strategy, vol. 26 no. 3
Type: Research Article
ISSN: 0275-6668

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Article
Publication date: 21 December 2020

Joon-Hee Oh

This study aims to test the authors’ theory that in an integrated sales team, the larger team (either from the acquiring or acquired firm) dominates the smaller team, even…

Abstract

Purpose

This study aims to test the authors’ theory that in an integrated sales team, the larger team (either from the acquiring or acquired firm) dominates the smaller team, even though it may be less competent than the smaller one, and that the level of competence of the integrated entity with the dominant but inferior larger team is bound to deteriorate.

Design/methodology/approach

The study tests the theory by conducting a laboratory experiment.

Findings

The results from the experiment show that an asymmetrical employee composition structure creates merger dominance in the post-integration group and influences the integration performance.

Research limitations/implications

Considering the lack of mergers and acquisitions research in the marketing literature, the author believes that this study contributes new information to the literature. The finding that an integrated entity with a dominant but inferior larger partner will demonstrate a resulting degeneration of competence invites empirical research for validation.

Practical implications

The integration of sales teams is central to ensuring revenue growth and driving the value that mergers promise but often fail to realize. The study findings provide some practical insights in this regard.

Originality/value

Mergers between asymmetrical partners are common phenomena. However, few studies have investigated how an unequal size of sales teams in pre-merger firms influences the effective integration of different sales teams. To fill this research gap, this study examines whether the involvement of an unequal number of salespeople from pre-merger firms in a post-merger sales team may influence its post-merger performance.

Details

Journal of Business & Industrial Marketing, vol. 36 no. 7
Type: Research Article
ISSN: 0885-8624

Keywords

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Abstract

Details

Making Mergers and Acquisitions Work
Type: Book
ISBN: 978-1-78743-350-2

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Article
Publication date: 3 April 2018

Irene Maria Schönreiter

Post-merger integration (PMI) has received much attention in recent years due to an increasing number of merger and acquisitions (M&As). Process harmonization plays an…

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1496

Abstract

Purpose

Post-merger integration (PMI) has received much attention in recent years due to an increasing number of merger and acquisitions (M&As). Process harmonization plays an important role during the PMI. The purpose of this paper is to find out if there is any methodology available for process harmonization in the PMI phase. From a PMI/M&A perspective, business process management (BPM)/quality management perspective and change management perspective, the existing literature is analyzed.

Design/methodology/approach

A structured literature review covering a wide field of publications in the interface of BPM, quality management and PMI-related publications is used to identify process harmonization methodologies after M&A and disclosing interrogations for future research.

Findings

There is hardly any connection found between PMI and business process harmonization in literature. While information technology/systems integration in PMI is researched in various publications, a special methodology or integration approach tailored for business processes and management systems is not available despite numerous literatures on PMI, BPM, quality management and change management. Nonetheless, these articles contain relevant recommendations as a part of the big picture. So here lies the optimal starting point for future research.

Research limitations/implications

Although this literature review has regarded publications of numerous databases, limitations might follow the selective citation due to thousands of articles in the field of M&A, PMI, BPM and quality management. Further, process harmonization and standardization have been regarded in largely as synonyms.

Originality/value

To the best of the authors’ knowledge, no systematic literature review in this interface has been previously published.

Details

Business Process Management Journal, vol. 24 no. 2
Type: Research Article
ISSN: 1463-7154

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Article
Publication date: 25 May 2020

Jeffrey M. Voth

This paper aims to offer an original analysis of how three of the largest aerospace and defense (A&D) companies equipped their organizations for merger integration success.

Abstract

Purpose

This paper aims to offer an original analysis of how three of the largest aerospace and defense (A&D) companies equipped their organizations for merger integration success.

Design/methodology/approach

Through a multi-case study, this paper explores the post-merger integration process for large-scale transactions completed over a 25-year period. Semi-structured interviews were conducted with industry executives and leading management consultants. The process involved collection of primary data, analysis of secondary data drawn from publicly available company documents and identification of key factors that led to success.

Findings

Five interdependent success factors (Figure 1) support integration teams and capture deal value. Managing the process as a megaproject further facilitates the effectiveness of post-merger integration, enabling leaders to remain laser-focused on integration activity while driving toward a long-term vision for the newly formed organization.

Practical implications

Merger integration has been identified as a primary source of deficiency that prevents acquirers from achieving anticipated results, negatively affecting merger success. Based on the findings of this paper, firms are more likely to create a compelling long-term value creation agenda when five essential factors are combined with a megaproject approach to manage the post-merger integration process.

Originality/value

This study advances current knowledge in the field by responding to requests to further explore the dimensions of merger integration that facilitate success and improve shareholder value, contributing new data to inform extant theories regarding merger integration and megaproject management and adding to the limited research on post-merger integration within the A&D industry.

Details

Journal of Business Strategy, vol. 42 no. 5
Type: Research Article
ISSN: 0275-6668

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Article
Publication date: 10 April 2017

Ana M. Romero-Martínez and María Concepción García-Gómez

The purpose of this paper is to investigate the merger arranged in the audiovisual sector between Antena 3 and La Sexta, and specifically the pre- and post-merger factors…

Abstract

Purpose

The purpose of this paper is to investigate the merger arranged in the audiovisual sector between Antena 3 and La Sexta, and specifically the pre- and post-merger factors. This study adopts a comprehensive approach for the analysis of the reasons behind this strategic decision and the role that structural and human integration and the decision on the right momentum and integration speed played in the merger success.

Design/methodology/approach

A single case study research method is used. This qualitative methodology provides richer data to understand complex transactions such as mergers and acquisitions (M&As). According to the data triangulation technique, two research methods were used, in-depth interviews and archival secondary data, including confidential reports and archival trade press.

Findings

The merger involving Antena 3’s takeover of La Sexta in October 2012 has been seen as one of the most successful operations ever undertaken in Spain’s audiovisual industry. The main motivation was to increase the organisation’s size to make it more competitive in the market, thus reducing costs, generating synergies and improving performance. Structural and human integration has provided the backbone for this success, all at a time marked by the global financial crisis and its knock-on effect on the downturn in the advertising market. Another of the key factors of success was that the changes in the organisational systems and processes were designed and partially implemented before the incorporation of La Sexta.

Practical implications

This work has highlighted the need for proper planning and a suitable choice of timing in M&A operations. Management should pay special attention to the integration of human and productive resources to generate synergies on the road to success.

Originality/value

This paper’s main contribution is to highlight an example of a successful M&A in the audiovisual sector in Spain by adopting a holistic perspective. While there are scarce studies in this industry, previous research on this topic is mostly quantitative and, moreover, the rate of success in M&A is quite low.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 15 no. 1
Type: Research Article
ISSN: 1536-5433

Keywords

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