There are substantial bodies of literature that advance theory about why Merger and Acquisition (M and A) candidates are found to be unattractive, why negotiations aren???t concluded and why the benefits of companies that are acquired are not realized. Little, if any, research identifies why M and A opportunities are not pursued in the period after candidates are analysed and found to be attractive but before negotiations begin. This study addresses this period by developing a theoretical framework of the variables that intervene to reverse decisions to pursue apparently attractive candidates before negotiations begin and which, in doing so, result in missed opportunities. The study is informed primarily by the Strategic Management content literature (Ansoff, 1965, Porter, 1980) but draws from the strategy process literature (Huff and Reger, 1987) including streams in Strategic Decision Making (SDM) (Papadakis and Barwise, 1998, Schwenck, 1995). The framework is developed using a multiple-case study method. This choice was dictated by the study???s theory building objective, the nature of the research questions ??? that is, what variables influence decisions and how? ??? and the lack of an existing theoretical foundation on which to build. The sample consisted of 37 decisions reversals made by 27 firms in Australia, Europe and the USA. The results suggest that there are three major categories of variables that stop acquirers from pursuing potentially attractive acquisition candidates. These are related to the acquirers???: ??? Strategy and objectives: For example, whether there is a change in strategy or objectives, or either or both are poorly understood and agreed between organizational levels or units; ??? Organizational functional resources: For example, whether constraints on appropriate knowledge and skill sets develop or are perceived to be likely to develop during the post-evaluation period; ??? Other financial factors: For example, whether a shortage of funds develops. Twelve individual variables are identified. Ten of these appear to be consistent with factors that Ansoff and colleagues (1971) associate with post-acquisition failure although variable definitions are not always comparable. Poor management of the variables thus appears to have the potential to expose acquirers to two different but important vulnerabilities. First, potentially attractive M and A opportunities may be forgone if the variables are operative in the post-evaluation ??? pre-negotiation period; second, if they don???t become operative until after the acquisition is consummated, the benefits of attractive companies that are acquired may not be realized. This study???s most important contribution is to the theoretically diverse base of acquisition performance literature which, to-date, tends to examine phases in the M and A decision making process before or after the focal period of this study. It also illustrates the use of a general multi-theoretic model of Strategic Decision Making (Rajagopolan, et al., 1993, 1998) exclusively in the M and A domain, a domain whose decisions are worthy of study in their own right. Finally, it provides insights into a new set of factors subject to control that managers may take into account in their acquisition planning.
| Identifer | oai:union.ndltd.org:ADTP/225547 |
| Date | January 2005 |
| Creators | Connell, Richard B., Marketing, Australian School of Business, UNSW |
| Publisher | Awarded by:University of New South Wales. Marketing |
| Source Sets | Australiasian Digital Theses Program |
| Language | English |
| Detected Language | English |
| Rights | Copyright Richard B. Connell, http://unsworks.unsw.edu.au/copyright |
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