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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

Recent Volumes:

• Volumes 1–2: Edited by Cary L. Cooper and Alan Gregory

• Volumes 3–21: Edited by Sydney Finkelstein and Cary L. Cooper

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ADVANCES IN MERGERS AND ACQUISITIONS - Volume 22

ADVANCES IN MERGERS AND ACQUISITIONS

EDITED BY

CARY L. COOPER

Alliance Manchester Business School, UK

AND

SYDNEY FINKELSTEIN

Tuck School of Business, 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 2023

Editorial matter and selection © 2023 Cary L. Cooper and Sydney Finkelstein.

Individual chapters © 2023 The authors.

Published under exclusive license by Emerald Publishing Limited.

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No part of this book may be reproduced, stored in a retrieval system, transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by The Copyright Licensing Agency and in the USA by The Copyright Clearance Center. Any opinions expressed in the chapters are those of the authors. Whilst Emerald makes every effort to ensure the quality and accuracy of its content, Emerald makes no representation implied or otherwise, as to the chapters’ suitability and application and disclaims any warranties, express or implied, to their use.

British Library Cataloguing in Publication Data

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

ISBN: 978-1-83753-861-4 (Print)

ISBN: 978-1-83753-860-7 (Online)

ISBN: 978-1-83753-862-1 (Epub)

ISSN: 1479-361X (Series)

Contents

About The Editors

Cary L. Cooper is the Author and Editor of more than 175 books and is one of the 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 Past President of the Chartered Institute of Personnel and Development, Past 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 Past 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 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 90,000members). 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 at the Tuck School of Business at Dartmouth College, where he teaches courses on Leadership and Strategy. He also has experience working with executives at Dartmouth and other prestigious universities around the world. He holds degrees from Concordia University and the London School of Economics, as well as a PhD from Columbia University in Strategic Management. Professor Finkelstein has published 23 books and 85 articles, with several bestsellers, including the #1 bestseller in the USA and Japan, Why Smart Executives Fail. On Fortune Magazine’s list of Best Business Books, the Wall Street Journal called it “a marvel – a jargon-free business book based on serious research that offers genuine insights with clarity and sometimes even wit … It should be required reading not just for executives but for investors as well.” His latest bestselling book is SUPERBOSSES: How Exceptional Leaders Master the Flow of Talent, which was named one of Amazon’s “Best Books” on business and leadership for 2016. LinkedIn Chairman Reid Hoffman calls it “a leadership guide for the Networked Age.” Professor Finkelstein is a Fellow of the Academy of Management. He has had three books nominated for the Academy of Management’s Terry Book Award, the most prestigious such honor in the field. He is a recognized thought leader on leadership, strategy, and corporate governance, and is listed on the “Thinkers 50,” the most prestigious ranking of management thinkers in the world. He is well known for his keynote speeches and television appearances, and is a regular columnist for the BBC.

About The Authors

Mohammad Faisal Ahammad is a professor of International Business & Management at Leeds University Business School, University of Leeds, UK. He is the director of JEL India & South Asia Business Centre (ISABC) at the University of Leeds. He is an Active Researcher in the field of international business, particularly in the area of cross-border mergers and acquisitions and the sustainability of MNEs and SMEs in South Asia. He is a Member of the Editorial Board of the Journal of World Business, the British Journal of Management, and the Journal of Management Studies. He won the “IBR 2016 Best Paper Award” for his paper “Knowledge Transfer and Cross-Border Acquisition Performance – The impact of cultural distance and employee retention” published in the International Business Review. His work has appeared in the British Journal of Management, Journal of World Business, Human Resource Management (USA), Journal of Organizational Behaviour, International Business Review, International Marketing Review, Journal of Corporate Finance, and elsewhere.

Urs Daellenbach is a Professor of Strategic Management at Te Herenga Waka | Victoria University of Wellington’s Business School. His research interests focus on competitive advantage, the resource-based view, governance, and strategic processes for managing R&D and innovation. He is currently Co-leader of a research team within New Zealand’s Science for Technological Innovation National Science Challenge which addresses the barriers and enablers of engagement with/by key stakeholders of science research.

João Pedro Delgado is a candidate to a PhD in Management at Nova SBE. Among other accreditations, he holds an MBA, Master in Finance, Master in Business Intelligence, and Master in Engineering. As a Senior Manager with more than 20 years of international experience, he worked for large MNC organizations in the management of business units and execution of M&A transactions.

Dries Faems holds the Chair of Entrepreneurship, Innovation, and Technological Transformation at WHU – Otto Beisheim School of Management. He is a Visiting Professor at the LUISS University and Ghent University. His current research focuses on data-driven entrepreneurship and innovation ecosystems. He is the Academic Co-director of the WHU Entrepreneurship Center and Coordinator of the WHU Innovation Ecosystem Hub. The core purpose of these initiatives is to further nurture the entrepreneurial spirit in the WHU ecosystem.

Theresa M. Floyd is an Associate Professor of Management at the University of Montana College of Business. She earned her PhD from Gatton College of Business and Economics at the University of Kentucky in 2014. Her research interests encompass two main streams, both of which incorporate social network theory and analysis. The first stream, in the realm of business management, focuses on social cognition, social influence, and the effects of organizational change on organizational identification and attachment. The second stream, in the realm of natural resource governance, focuses on how psychological processes operate within the social networks of resource stakeholders to influence attitudes and outcomes. Prior to her doctoral studies, she worked in retail merchandising for industry giants such as Gap and PetSmart. She loves bringing her business experience and research experience to her teaching and has a passion for preparing her students for successful business careers.

Emanuel Gomes is an Associate Professor at Universidade Nova, Nova School of Business and Economics (Portugal). He is a Regional Editor for the Journal of Knowledge Management. He is the Author of three books on mergers and acquisitions and several papers published in international refereed journals like the Journal of International Business Studies, British Journal of Management, Journal of World Business, Journal of Organizational Behavior, Long Range Planning, International Journal of Production and Operations Management, International Business Review, and Regional Studies.

John A. Howard, CFA, ASA, is a Partner at High Rock Partners in Raleigh, NC, USA, a boutique firm of strategic and M&A Advisors serving middle market companies. His previous background in the securities industry working as a Sell-side Equity Analyst has provided him with a strong foundation in mergers and acquisitions, business valuations, and capital market theory and applications. Over his career, he has completed several hundred valuation assignments, covering a wide variety of industries, and has served as an Expert Witness in the area of business valuation numerous times. He obtained his undergraduate degree from Wake Forest University and an MBA from the University of South Carolina. He has achieved his Chartered Financial Analyst (CFA) designation from the CFA Institute and his Accredited Senior Appraiser designation (ASA) in Business Valuation from the American Society of Appraisers.

Huma Javaid (PhD, University of Bath) is a Research Associate at the University of Manchester, Alliance Manchester Business School, and the Manchester Institute of Innovation Research. Her research focuses on corporate strategy, mergers and acquisitions, alliances, corporate venture capital, and innovation performance in technology firms. Her latest research as a postdoc is on the impact of digital technologies and skills transformation in the UK.

Svetlana N. Khapova is Professor of Organisational Behaviour at the Vrije Universiteit Amsterdam. She is the Past Division Chair of the Careers Division of the Academy of Management. Her research focuses on strategic leadership topics, including leadership development, career mobility, emotions in organizations, and board dynamics. Her research has been published in various top-tier journals. She is the Author (together with M. B. Arthur and J. Richardson) of the book An Intelligent Career: Taking Ownership of Your Work and Your Life, published by Oxford University Press in 2017.

David R. King is the Higdon Professor of Management in the College of Business at Florida State University. His research interests involve corporate restructuring, including acquisitions and divestment.

David P. Kroon is an Associate Professor of Strategy and Organisation at the Vrije Universiteit Amsterdam and an Affiliate Member of the European M&A Institute. He received his PhD from Tilburg University, in the Netherlands. His current research focuses on inter-organizational collaborations, organizational change, and post-M&A integration with a particular emphasis on identity/identification, justice, culture, communication/language, emotions, and trust. His research has been published in various top-tier journals and edited books.

Kenneth H. Marks, CM&AA, CFq, is the Founder and Managing Partner of High Rock Partners in Raleigh, NC, USA, a boutique firm of strategic and M&A Advisors serving middle market companies. He is the Lead Author of the first and second editions of Middle Market M&A: Handbook for Advisors, Investors, and Business Owners. He is also the Lead Author of two editions of the Handbook of Financing Growth: Strategies, Capital Structure, and M&A Transactions, all published by John Wiley & Sons in their Finance Series. He has an electrical engineering background and obtained an MBA from the Kenan-Flagler Business School at the University of North Carolina Chapel Hill. He is a Certified Merger & Acquisition Advisor (CM&AA) and holds a Corporate Finance Qualification (CFq) from the Institute of Chartered Accountants in England and Wales.

Olimpia Meglio (PhD in Business Administration) is currently an Associate Professor at the University of Naples “Federico II.” Her research interests revolve around growth strategies focusing on mergers and acquisitions. Her works are regularly presented at international conferences and published in leading academic journals, including the Journal of Management Studies, Business Research, and Long Range Planning.

Pedro Neves is a Full Professor at Nova School of Business and Economics. He has published in journals such as the British Journal of Management, Human Resource Management, Journal of Applied Psychology, Journal of Occupational and Organizational Psychology, and The Leadership Quarterly, and (co)authored/edited six books. He currently serves as Associate Editor of the Journal of Applied Behavioral Science. His research interests focus on leadership and interpersonal relationships in the workplace, change management, and entrepreneurship.

Timo Paumen started to pursue a PhD program at the Vrije Universiteit Amsterdam parallel to working in the M&A Advisory Section at KPMG in Cologne, Germany. After three years of M&A consulting experience, he joined the M&A Department of the REWE Group, one of Germany’s leading retail and tourism groups, as a Project Manager. His research focus lies on M&A failure and whether there are factors impacting the outcomes of M&A transactions. His research particularly evolves around private equity funds’ processes and operations, as well as M&A team roles and structures.

Taco H. Reus is a Professor in Global Strategy at the Rotterdam School of Management, Erasmus University. He received his PhD in Strategic Management from Florida State University. His research focuses on the curious psychology behind critical strategic events such as mergers and acquisitions. His research appears in top-tier management journals such as the Academy of Management Journal, Academy of Management Review, Administrative Science Quarterly, Journal of Management Studies, Strategic Management Journal, and the Journal of International Business Studies.

Sally Riad’s research is positioned at the intersection of organization and difference. It is based on critical approaches to a range of organizational topics, including value, mergers and acquisitions, culture, identity, and leadership. Her work has been published in international journals, for example, Culture & Organization, Gender Work & Organization, Journal of Management Studies, Journal of Management History, Leadership, Leadership Quarterly, Organization, Organization & Environment, and Organization Studies. She teaches knowledge management, research methods, and strategic management and has held several leadership roles in the School of Management.

Lars Schweizer holds the Chair of Strategic Management at Goethe University Frankfurt. He acts as the Academic Director of the Master of Pharma Business Administration at Goethe Business School. His main research interests are Strategic Management and M&A. His publications appeared among others in journals such as the Academy of Management Journal, the Strategic Management Journal, the Journal of Management, Long Range Planning, as well as Industrial and Corporate Change.

Elio Shijaku is an Assistant Professor at the University of Barcelona. His research interests include social networks (individual and organizational), human resource management (systems), and corporate strategy (alliances and acquisitions).

Anthony Stevenson teaches at the University for the Creative Arts and the University of Derby, both in the UK. Subject areas include corporate finance, M&A, economics, and accounting. He began his career in the chemical industry and had operating positions within industrial companies; one of those positions included being a Director of Mergers and Acquisitions. He has published articles in the Studies in Economics and Finance and in the Journal of Business and Economics. He is a Certified Practicing Accountant (CPA), a Member of the CFA Institute, obtained an MSc and MBA from the University of Leicester, and completed his PhD Finance Banking at Loughborough University.

Wookje (UJ) Sung is an Assistant Professor of Management at Hong Kong Baptist University. He earned his PhD from the University of Kentucky. He is mainly interested in how individuals’ struggle to survive and for power may bring about group-level and organizational-level performance and changes. He is particularly interested in employees’ changing social relationships during organizational change. Corporate mergers and acquisitions are one of the organizational change contexts that his research is focused on, and he has published papers on the topic.

Jean Wang has been a doctoral graduate of the Chair of Strategic Management with Professor Dr. Lars Schweizer at Goethe University Frankfurt. Before joining the Chair, she has been a frontline business practitioner of Strategy and Corporate Finance in China and overseas markets on both corporate development and investment banking. Her research focus is primarily on Chinese cross-border M&A integration issues, especially with human factors, knowledge transfer, and remote R&D management. She holds an MBA degree in high-tech management from the University of Saskatchewan in Canada and a bachelor’s degree of Science in Pharmacy from China Pharmaceutical University in China.

Introduction

Cary L. Cooper and Sydney Finkelstein

The last year has seen unprecedented global events: the pandemic, the cost of living crisis, energy insecurity, the war in Ukraine, and rising inflation and interest rates in most developed economies. This has led to pushing many countries into recession or minimally to a ‘no growth’ situation, which will adversely affect the global economy, on top of everything else. This has led, and will continue to lead in 2023, to more downsizing, restructurings, and inevitably to an increase in mergers and acquisitions.

As a consequence of these trends, recent research into mergers and acquisitions has focused on a range of topics relevant to this changing landscape. This volume will highlight interesting behavioral themes as well as timely practical solutions to the dilemma of M&A failures. The first chapter by Olimpia Meglio, David R King, and Elio Shijaku explores information asymmetries in acquisitions, with an emphasis on the role of social ties. They develop a typology of informal and formal social ties “to develop how social ties with stakeholders influence acquisitions and can increase their success.”

Chapter 2 by Mohammad Faisal Ahammad highlights the increasing role of sustainability in M&As. The author reviews the global literature on the role of sustainability in the context of mergers, acquisitions, and other partnering relationships. He uses “proxies of sustainability such as environment, social, and governance (ESG) and corporate social responsibility (CSR) and attempted to examine the relationship between ESG/CSR performance with stock market reaction or returns” – and ultimately on the role of sustainability fits into the landscape of M&As.

Chapter 3 by Jean Wang and Lars Schweizer provides a very interesting case study of a Chinese cross-border M&A where the authors explore the effects of human factors on knowledge sharing during an integration. They explore three acquisition-related human factors: (1) the communication programme with top management involvement; (2) professional competence-based trust between Chinese acquirers and their overseas acquired subsidiaries; and (3) the impact of high turnover of key staff at the Chinese acquirer on the effectiveness of knowledge transfer.

Chapter 4 by Dries Faems and Taco H. Reus explores, through a case study, the triadic relationship between divestors, targets, and acquirers. As the authors highlight “the case sheds light on how divestors and acquirers together shape synergy realization efforts and identity building by targets, causing dramatic shifts in perceptions of success throughout the acquisition process.” They also highlight the impediments that shape post-acquisition choices and processes.

In Chapter 5, Kenneth H. Marks, John A. Howard, and Anthony Stevenson explore survey data and the experiences of buyer and sellers from due diligence to the completion of middle market M&As. They sampled 130 buyers and sellers from 2013 to 2022 and found a range of factors driving the selling (e.g., economic buoyancy and retirement) and buying behavior of these businesses, as well as differences in those who act, consult, and guide the selling process. Understanding the process of mid-market M&As is very helpful in making it work, on both sides.

Huma Javaid, in Chapter 6, examines the use of signaling mechanisms to identify promising acquisition targets. She explores various inter-organizational relationships of target firms, based on the characteristics of target firms and characteristics of their partners. This helps acquirers understand the quality of the target firms.

Theresa M. Floyd and Wookje (UJ) Sung’s chapter suggests that “post merger success depends heavily on the social and cultural integration of the two legacy organizations.” They highlight the importance of taking a social network approach in understanding the dynamics of integration post-merger. They explore the obstacles to this approach, how they can be overcome them and how this process can make a real difference to post-merger success – not easy but important.

Chapter 8 by Sally Riad and Urs Daellenbach explores the pace at which merger integration takes place. There have been debates about whether it is better to approach integration slowly or whether fast integration is more effective. The authors explore the arguments for both views and review the research that has been done. They highlight the gaps in the research by “attending to the respective tensions between a prosocial service ethos on the one hand and a managerialist ethos on the other hand.”

Timo Paumen, David P. Kroon, and Svetlana N. Khapova explore in the next chapter the role of private equity in driving M&A success and performance. Although M&A failure rates remain high, the authors suggest that the recent evidence is that private equity investors tend to be more successful. This is due to three factors: their better organisational set-up; their professional identities; and their incentive-based systems.

The final chapter by João Pedro Delgado, Emanuel Gomes, and Pedro Neves highlights the micro-foundational factors that might influence M&A performance, that is, the individual and team level issues. The chapter focusses on the importance of emotions in terms of this major workplace event. They reviewed 41 papers and came up with 19 themes related to individual emotions involved in the M&A process. They show how positive emotions by employees involved can have a positive impact on acquisition performance and success.

All of these chapters help us to better understand why M&As have such a high failure rate, and how we can better work toward enhanced outcomes for the individual and the organization. We hope you will find this volume useful in creating more successful M&As.