Advances in Mergers and Acquisitions: Volume 14

This chapter examines recent practices being adopted in the Precombination Phase of a merger or acquisition–a period that typically has not been utilized by leaders to put deals on the track toward success. We begin by briefly reviewing the M&A process and highlighting the success factors and common problem areas in each of the three phases of a deal. We then discuss emerging trends in making the Precombination Phase more successful, including conducting a more thorough due diligence, setting a vision for the combined organization, accelerating early integration planning, and establishing integration principles and priorities.

Our review shows that M&A research fails to discuss questions of gender. In this chapter, we aim to understand this lack of sensitivity to gender in analyzing how M&A processes unfold. We discuss strategic and people-oriented M&A research, seek to explain why gender and gender relations are not debated therein, and offer some ideas on how they could be incorporated in the analyses. We also consider the contemporary system of academic publishing for understanding the marginal position of gender research in general. Overall, the chapter paves the way for arguing why the gender perspective would benefit M&A research so that it would become better equipped to address the focal phenomenon as constituted in its social, cultural, and economic context.

Management buyout (MBO) is a specialized form of acquisition with different motives. Sometimes, there are initiatives taken by the senior management to bailout the firm from sickness. The predominant agency theory focuses only on the governance issues in the MBO firms and this theory can be applied to understand how managerial discretion can play vital roles in mitigating value destruction in the post-MBO firm. A CEO-led MBO is presumed to be greed-driven (Bebchuk, L., Cremers, M., & Peyer, U. (2011). The CEO pay slice. Journal of Financial Economics, 102, 199–221.). But a senior management team-led MBO is said to be a socialistic move. By default, MBOs are debt-driven, unless the buying management team is financially affluent, which may be rare, considering the price for the buyout. Private equity (PE) players play a dominant role in providing and or arranging funds in the form of equity and or debt. There is a notion that the PE investors help promote entrepreneurial and modern management practices. The MBO target firm has to ensure returning the entire money back to the sponsors within the shortest possible time out of the operational cash flow. Therefore, various issues like identifying a target firm, sourcing mix of finance, MBO price determination, value creation and value delivery to all stakeholders are all important for understanding the subject. This chapter attempts to construct a robust model for structuring MBO to ensure value fairness to all parties involved in the transaction.

Mergers and acquisitions strategies are not risk-free, potential problems in achieving success include integration difficulties, inadequate evaluation of target, inability to achieve synergy, and complexity. Such strategies can fail for many reasons including inadequate evaluation of targets or inadequate pre-decision control mechanisms. Mergers and acquisitions are reviewed in this chapter as strategic investment decision-making perspective. Established financial analyses remain important in appraising investment choices, despite their limiting assumptions and their recognised shortcomings in capturing strategic project dimensions. However, managers balance these economic analyses with less-structured, strategic analyses underpinned by informed judgement. The fact that empirical studies reveal a continued reliance on judgement by investment decision-makers does not mean that rational economic analysis is a futile exercise. What studies of practice do seem to suggest is that the theory and practice of strategic investment decision-making need to take into account both economically rational and intuitive decision processes. Reflecting on the research evidence, we conclude that strategic investment appraisal will be best supported by approaches that (i) couple sound economic analysis with the development of managerial judgement and (ii) take account of the broader decision-making context within which both economic and strategic analyses are used.

Private, middle-market companies that choose to implement mergers, acquisitions, or growth strategies in today’s environment often face challenges when engaging with the capital markets, particularly when bridging the valuation gap between market values and owner values¹ (Marks, K., Slee, R., Blees, C., & Nall, M. (2012). Middle market M&A: Handbook for investment banking and business consulting. Hoboken, NJ: Wiley.). This chapter applies traditional corporate finance theory to the real-world dynamics of private, middle-market companies and outlines practical steps to shrink the value gap and increase transaction readiness.

This chapter explains how HR executives can leverage social network understanding in order to facilitate post-merger integration. We describe two social network mechanisms (brokerage and contagion) and explain their effect on organizational functioning. We then present a framework incorporating interventions in three core areas of HR involvement in mergers and map those interventions on the timeline of the merger so as to provide a roadmap for developing and implementing interventions based on social network insight. We argue that an understanding of social networks and the proposed interventions would allow HR executives to better monitor and steer post-merger integration.

Cultures don’t clash … people do. Hidden below the veil of “incompatible cultures” is a complex network of human-to-human interaction involving information-exchange transactions that have gone awry. The multitude of these troubled exchanges results in what is often branded as “M&A failure, due to culture conflict.”

This chapter presents a theoretical discussion that features practical dynamics of the post-merger integration (PMI) process. The aim is to cultivate a deeper understanding of critical, less-acknowledged micro-level aspects of the post-merger integration stage, specifically, those which underlie the development and maintenance of an organization’s culture and lead to organization performance. It is the unseen information exchange among human actors that leads to the perceptible post-merger outcomes, such as cultural unity and task performance. The quality of these micro-exchanges leads to the value capture from the M&A transaction, thus determining the success – or not – of the combination.

Presented is a synthesis of numerous existing theories, perspectives, and ideas from various scholarly communities, combined with a drill-down to the basic human interactions that define a culture and lead to positive performance. Information flow is the sustenance of an organization, so when merging organizations restructure the information flow is abruptly disrupted, often at pronounced near-term cost. The information-flow channels must be mended for social unification and performance value goals of the combined organization to be realized. The information-transporting social networks of the organizational actors must therefore adapt and intermingle across the old-organizational faultlines. This is accomplished when individual actors alter their personal social networks and retool themselves for a new set of information-exchange interactions.

In closing, the author counsels managers to focus on the dyadic information exchange of their direct-reports as an actionable approach to PMI management. The chapter concludes by pointing researchers toward studying the micro-level aspects of PMI and offers computer modeling and simulation, and laboratory experiments as effective ways to study PMI dynamics at the micro-level of organization behavior. Such methods may also lead to an ability to forecast outcomes of specific post-merger integration scenarios.

Mergers and acquisitions (M&As) are today common options for business survival and development. They imply the adaptation of enterprises to new conditions being one of them, the integration of the enterprises involved in the deal. That integration is achieved through strategic actions in organizational processes and structures, as well as through the management of the subjective conditions that support human performance. One of these conditions is the individual and team identities. The identity plays a crucial mediating role in the adaptation and integration because the mutual acknowledgment of the self and the other in any social interaction has the power to influence the social interaction. The acknowledgment of “Who am I?” or “Who are you?” is a mandatory information of social interactions. The concept of identity is revised in its complexity and applied in the understanding of the integration of teams and individuals in M&As. The chapter ends concluding that the management of M&As comprises management of team and individuals identities.

This study focuses on intra-industry determinants of acquisition performance. Seven years of printed research on acquisitions from 10 top-tier business journals is categorized on the basis of R&D intensity – that is, per industry classification: high-, medium-, and low-technology – and determinants of acquisition performance. Instead of broadly generalizing acquisition performance determinants across industries, this study focuses on how the practice of enhancing acquisition performance is different per industry classification and what acquiring firms need to take into account.