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ADVANCES IN MERGERS AND ACQUISITIONS

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ADVANCES IN MERGERS AND ACQUISITIONS

Series Editors: Cary L. Cooper and Sydney Finkelstein

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ADVANCES IN MERGERS AND ACQUISITIONS VOLUME 16

ADVANCES IN MERGERS AND ACQUISITIONS

EDITED BY

CARY L. COOPER

Alliance Manchester Business School, University of Manchester, Manchester, UK

SYDNEY FINKELSTEIN

Tuck School of Business, Dartmouth College, Hanover, NH, USA

United Kingdom – North America – Japan – India – Malaysia – China

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Emerald Publishing Limited

Howard House, Wagon Lane, Bingley BD16 1WA, UK

First edition 2017

Copyright © 2017 Emerald Publishing Limited

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British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

ISBN: 978-1-78714-693-8 (Print)

ISBN: 978-1-78714-692-1 (Online)

ISBN: 978-1-78743-008-2 (Epub)

ISSN: 1479-361X (Series)

List of Contributors

About the Editors and Authors

Cary L. Cooper is the author and editor of more than 125 books and is one of Britain’s most quoted business gurus. He is the 50th Anniversary Professor of Organizational Psychology and Health at Alliance Manchester Business School, University of Manchester, UK. He is the President of the Chartered Institute of Personnel and Development, a founding President of the British Academy of Management, a Companion of the Chartered Management Institute and one of only a few UK Fellows of the (American) Academy of Management, past President of the British Association of Counselling and Psychotherapy, and President of RELATE. He was the Founding Editor of the Journal of Organizational Behavior, former Editor of the scholarly journal Stress and Health and is the Editor-in-Chief of the Wiley-Blackwell Encyclopaedia of Management; now in its 3rd Edition. He has been an advisor to the World Health Organisation, ILO, and EU in the field of occupational health research and wellbeing, was Chair of the Global Agenda Council on Chronic Disease of the World Economic Forum (2009–2010, and currently a member of the Global Agenda Council on mental health of the WEF) and is Immediate Past Chair of the Academy of Social Sciences (comprising 47 learned societies in the social sciences and 90,000 members). He was awarded the CBE by the Queen in 2001 for his contributions to organizational health and safety; and in 2014 he was awarded a Knighthood for his contribution to the social sciences.

Sydney Finkelstein is the Steven Roth Professor of Management and Director of the Center for Leadership and the Tuck Executive Program, both at the Tuck School of Business at Dartmouth College. He holds a Masters degree from the London School of Economics and a Ph.D. from Columbia University. Professor Finkelstein has published 20 books and 80 articles, including the #1 bestseller Why Smart Executives Fail. He is a Fellow of the Academy of Management and on the global Thinkers 50 list of top management thought leaders. His latest bestselling book is Superbosses: How Exceptional Leaders Master the Flow of Talent, which LinkedIn Chairman Reid Hoffman calls the “leadership guide for the Networked Age,” while Jeff Immelt, Chairman and CEO of GE, says “Superbosses gives leaders a playbook to bring out the best in their people.” He can be reached on twitter: @sydfinkelstein, or via email, sydney.finkelstein@dartmouth.edu

Fadi Alkaraan is Associate Professor of Accounting and Finance. He received his Ph.D. degree in 2005 from Manchester Business School. Fadi held various teaching and research positions at Business Schools including the University of Manchester (UK), Abu Dhabi University, United Arab Emirates University, Gulf Private University and Aleppo University, and Grafton College of Management Sciences (Ireland). Recently, he joined University Cork Business School as a lecturer at the Department of Accounting, Finance & Information Systems. Fadi’s research interests mainly focus on contemporary issues of strategic investment decision-making and investment appraisal techniques, performance measurement, control mechanisms, and governance interface. His research projects are based on quantitative and qualitative methods to explore strategic management accounting practices and strategic investment decision-making within an organizational context.

Judith Ann Gebhardt is on the faculty at American University, Kogod School of Business, Washington DC, where she teaches Leadership and Organizational Behavior. Judith holds a Ph.D. in Organizational Psychology from the California School of Professional Psychology and four M.S. degrees in the areas of Organizational Psychology (California School of Professional Psychology), Biometry/Epidemiology (University of Southern California), and Psychology and Health Care Management (California State University, Los Angeles). She has taught or teaches MBA courses at St. Louis University (her alma mater!), The University of Maryland’s (UMD) Smith School of Business, The University of Southern California’s Marshall School of Business, Pepperdine and as well as The University of Mining and Technology located in Freiberg, Germany. Judith holds an executive coach accreditation at the Senior Practitioner level from the European Mentoring and Coaching Council (EMCC).

Anjali Bansal is currently serving the prestigious institute MICA, Ahmedabad as Assistant Professor. Anjali has earned her Ph.D. in Human Resource Management and Organizational Behaviour from Faculty of Management Studies (FMS), University of Delhi. She has expertise in HR strategy formulation during mergers and acquisitions. Anjali has also served University of Delhi as assistant professor where she taught courses related to HRM strategy in business. Anjali’s research focuses on areas like HR as strategic partner to organizations, change management, mergers and acquisitions (M&A), post-M&A integration strategy, and employees’ psychological phenomena during change.

David J. Burns, D.B.A. (1987, Kent State University) is Chair and Professor of the Department of Marketing and Professional Sales, Kennesaw State University. He has co-authored several books, published over 100 journal articles, numerous book chapters, and presented over 200 papers. His research interests include retail location and atmospherics, ethics, higher education, mission integration, and consumer culture. His teaching interests include retailing and other consumer-based areas, including Marketing and the Consumer Culture and Neuromarketing. He has received numerous grants and has held leadership positions in numerous academic organizations.

Nick Collett, PhD, is a Senior Lecturer in Financial Management at Alliance Manchester Business School. He has published widely in the areas of Mergers and Acquisitions, Corporate Turnaround, Business Ethics and the reaction of stock markets to company announcements. He has co-authored successful multi-edition books on Financial Management and Corporate Credit Analysis. He teaches Corporate Finance, Investment and Portfolio Management, Corporate Turnaround and Mergers and Acquisitions to MBAs and Executives. He has won the prestigious AT Kearney Manchester MBA teacher of the year award and has also been runner-up.

Terrill L. Frantz is Assistant Professor of Management at Peking University HSBC Business School, in Shenzhen, China. He has 20 years of corporate experience in global investment banks (Morgan Stanley and JP Morgan) in New York, London, and Hong Kong, and in consulting for organizations in other industries, such as chemicals, presidential politics, and numerous SMEs. His academic specialty is in Organization Behavior during M&A, with a primary research focus on Post-Merger Integration – he has published numerous academic articles and book chapters on the subject. Dr. Frantz has a life-long orientation in software technology, finance, and international business management, buttressed by both work experience (Asia-Pacific Operations Officer for Technology at Morgan Stanley, Assistant to the CIO at Morgan Stanley, etc.) and advanced degrees (Executive MBA from the Stern Business School, New York Univ.; Doctorate degrees in Computer Science from Carnegie Mellon Univ.(Ph.D.), and in Organization Change from Pepperdine Univ.(Ed.D.)).

Ömer F. Genç is currently Assistant Professor of Strategy & International Business at the Department of Business Administration of Abdullah Gül University (AGU). Before joining AGU, he worked at Minnesota State University, Mankato, as an Assistant Professor. Dr. Genç’s current research interests include cross-border mergers and acquisitions (M&As), competitiveness of companies, internationalization of small and medium sized enterprises (SMEs). Dr. Genç’s teaching portfolio includes Global Business Policies (Strategy Capstone), Global Strategic Management, Fundamentals of International Business, International Marketing, and Export Administration.

Prior to her faculty appointments, Judy practiced as a bilingual licensed family therapist (LMFT), working at a non-profit located in Los Angeles’ eastside. Her primary caseload included disenfranchised youth (including gang members) where she focused on developing communication skills, self-confidence, and goals which included employment. She has consulted with both public and private sector organizations including the Department of the Navy, Chief Information Office and Heineken Technical Services, The Netherlands. As a small business owner, she collaborated with The City of Los Angeles and the probation department, developing and implementing a communication training program ultimately recognized by the Justices. She also co-authored and delivered a training curriculum and focusing on customer service for The City of Pasadena. Judy also co-owns, with her husband, an orchid business that provides care and consultation services.

Judy works as an adjunct professor, consultant, and executive coach, and focuses on developing people and systems. Her research interests focus on coaching and ethics, strategic business development, intangible capital issues including behavioral due diligence in the M&A/change management process, and leadership development.

Kamal Ghosh Ray is currently Professor of Finance & Accounting and Dean of the School of Management, Presidency University, Bangalore, India. He has passion for knowing more on mergers and acquisitions. His book, titled Mergers and Acquisitions: Strategy, Valuation and Integration has been globally accepted as text cum reference book. He is an honorary senior fellow of the Institute for Mergers, Acquisitions and Alliances, Vienna, Austria.

Sangita Ghosh Ray is currently a Management Consultant in the area of Management Accounting. She is a fellow of the Institute of Cost Accountants of India. She held senior positions in Indian corporations. She is passionate about relating management accounting with mergers and acquisitions. She is consulted for valuation and pre-acquisition synergy estimation also.

Katty Marmenout holds a Ph.D. in Management from McGill University. She is a visiting professor of Organisational Behavior at Ecole hôtelière de Lausanne, Switzerland. Building on her practical experience in management consulting, her research is focused on the human side of M&A, women leaders, and equality and diversity in the workplace. Her work has been published in leading academic journals, including the Journal of Applied Behavioral Science and Human Resource Management.

Marjorie McInerney is Associate Dean for the Lewis College of Business at Marshall University. She graduated from the University of Akron with a B.S. in Business Administration, Marshall University for an M.B.A., and from The Ohio State University, for her Ph.D. She joined Marshall University as a Professor of Management in 1982.

Ralph McKinney Jr. is Assistant Professor of Management at the Lewis College of Business at Marshall University. McKinney has authored a number of publications concerning cryptocurrency, economics, forensic business practices, human resource management, indigent criminal defense, and poverty. In 2010, McKinney was recognized as one of 11 instructors for the Pearson NEIS Economics Insider Contest Instructor Award. He holds degrees from Aston Business School at Aston University in Birmingham, England (DBA), Marshall University (MBA), and West Virginia State University (RBA). Additionally, he is a licensed Private Investigator.

Muriel Mignerat is Associate Professor of Information Technology (IT) at the Telfer School of Management, University of Ottawa, Canada. Dr. Mignerat applies an institutional approach to the study of information system (IS) phenomena and is interested in IS project management practices and their evolution. Her research interests also relate to the application of IT in the healthcare sector. Her research has appeared in several journals including Journal of Information Technology, Information and Organization, Information and Management, International Journal of Medical Informatics, and Health Policy and Technology.

Dale Shao is the H. Paul Kizer Chair of MIS and Professor of Management Information Systems at the Lewis College of Business at Marshall University. Shao has published articles and presented papers relating to management information systems and pedagogical methodology in teaching in the management information systems area, as well as varied multidisciplinary topics. He holds degrees from Georgia State University (Ph.D.) and Old Dominion University (M.B.A., BSBA).

Lawrence Shao is Dean of the College of Business at Slippery Rock University and Professor of Finance. Shao has written three finance and management textbooks, published over 50 refereed journal articles, made more than 90 presentations and served as a business finance consultant. Dr. Shao has a Ph.D. in finance (University of Tennessee) and M.B.A. and B.B.A. (Old Dominion University). Previously, he served as Division Head of Finance and Economics and Professor of Finance at Marshall University teaching financial management courses in undergraduate, graduate, and Doctorate of Management Practice in Nurse Anesthesia programs.

Timo Sohl is Assistant Professor of Strategic Management at Pompeu Fabra University (UPF), Barcelona, and an Affiliated Professor at the Barcelona Graduate School of Economics. He has a Ph.D. in Management from the University of St. Gallen. Before joining UPF, he was a post-doctoral researcher at IESE Business School, Barcelona. His research focuses on corporate strategy, corporate diversification, and business model innovation. He is grateful for support from the Spanish Ministry of Economy and Competitiveness (ECO2014-57131-R).

Govert Vroom is a Professor of Strategic Management at IESE Business School, Barcelona, University of Navarra. He received his PhD from INSEAD. His research interests include competitive behavior, business models, and corporate diversification. He gratefully acknowledges the financial support of the Spanish Ministry of Economy and Competitiveness (Project ECO2015-71173-P) at the Public-Private Sector Research Center at the University of Navarra-IESE.

Rimi Zakaria is currently working as Assistant Professor of Management at the College of Business and Economics, University of Wisconsin-Whitewater. Dr. Zakaria’s research focuses on various macro-level issues falling at the intersection of strategic management and international business, especially within the contexts of mergers and acquisitions, strategic alliances, and non-governmental organizations. She teaches strategic management, international management, and negotiation & persuasion strategies at the undergraduate and graduate levels. Prior to joining academia, she worked as a management consultant in the manufacturing sector.

INTRODUCTION

As global business moves out of recession into slow growth in most of the developed and emerging economies, we are seeing an expansion of strategic alliances, mergers and acquisitions. The contributions, in this 16th annual volume of research/theory/practice on M&As, reflect this trend and explore the issues pre-merger/acquisition, strategic decisions, post-merger/acquisition, and ethical issues.

The first chapter highlights one of these trends, when some firms with strategic alliances are moving into acquisitions. As more and more firms during the recession developed synergistic alliances with other businesses as an intermediate strategic option, and found that it worked for them, the movement has been toward solidifying this relationship through acquisition. The next chapter explores one of the often forgotten factors in considering a merger, the management styles of the respective organizations. The author argues that what successful mergers and acquisitions require are “behavioral due diligence” of the leaders in the pre-merger stage of the process, to ensure either compatibility or what needs to be done to ensure success if the styles are fundamentally different. This “people orientation” pre-merger is the focus in the next chapter, where the authors suggest that the new organizations have the right mix of human capital; so the decisions about who to retain or not need to be done to ensure the right human resource mix for the merged organization.

In addition to these issues are those to do with strategic considerations, like strategic investment appraisals, which feature in our fourth chapter. This chapter explores how an organization might appraise an M&A as a strategic investment, highlighting a number of possible approaches and theories. One of these is the “special purpose acquisition company” (SPACs), which are set up to acquire a potential target. This follow on chapter suggests that SPACs, as they are currently configured, do not necessarily produce successful M&As but could be redesigned to do this and ensure more sustainable businesses. And finally in this strategic arena is the notion of “business model relatedness,” where both an acquirer and target have relatively common business models, there will be less identity conflicts that could harm post-acquisition performance.

In terms of the post-merger or post-acquisition period, there are important issues to smooth the inevitable potential cultural difficulties. Training during this transition stage is critical to minimize the stress of uncertainty and feelings of alienation, as the subsequent chapter highlights. There is a substantial literature on the perceived effectiveness of training during this transition period and employees level of commitment to the newly merged firm. And finally, the next chapter explores the PMI risk framework for classifying and identifying the potential risks that might inhibit post-merger success. This chapter identifies the relationship breakdowns that can occur in the post-merger integration phase. And finally, the last chapter explores the topic of ethical evaluations of the impact of M&As. This involves a stakeholder framework for evaluating M&A beyond just does it provide financial value: its ethics, governance, and desirability.

Although these chapters were standalone contributions, and not structurally integrated, you can see some themes from pre- to post-merger/acquisition on how we can be more systematic in our approach to M&As rather than a “fly by the seat of our pants” attitude to M&As. A more strategic approach is necessary in considering likely partners, in communicating when implementing, along with training and development; and in the post-merger phase an honest appraisal about ‘what’s not working’ rather than a corporate or PR cover-up. We hope you will find nuggets of useful research and advice to ensure a more successful M&A.

Cary L. Cooper

Sydney Finkelstein

Editors