Advances in Mergers and Acquisitions: Volume 21

Scholars typically view cross-legacy boundary spanners – employees who develop and maintain social relationships with coworkers from both legacy organizations – as the key integrators in mergers and acquisitions (M&As). Organizations even formally appoint employees with cross-legacy responsibilities to support the post-merger integration process. Recent research has started to emphasize, however, how difficult it can be to reap the benefits of a boundary-spanning position. Building and maintaining formal or informal boundary-spanning ties is costly because it requires time, attention, and political savviness. To better understand the perks and pitfalls of cross-legacy boundary-spanning, the authors identify and describe its structural and sociocultural dimensions and explain how they influence cross-legacy boundary-spanning in M&A contexts. The authors argue that the two dimensions can be seen as boundary conditions to the positive relationship between cross-legacy boundary spanning and post-merger integration. This chapter highlights the potential dark side of cross-legacy boundary-spanning and proposes a multi-dimensional model to explain how cross-legacy boundary spanners can avoid the pitfalls and promote the perks of their position in support of successful post-merger integration.

The potential for resource combinations to have adverse consequences for acquiring firms is often overlooked in research. However, considering potential inimical resources can explain target and acquiring firm actions across the phases (evaluation, completion, and integration) of an acquisition. The authors outline how managers deal with inimical resources in acquisitions. Specifically, during evaluation, due diligence offers managers from acquiring firms the opportunity to avoid potential inimical resources by abandoning an acquisition. During integration, inimical resources can be dealt with either by limiting integration, or with planned or unplanned divestment. As a result, inimical resources explain observed actions and provide a context for making and improving corporate restructuring decisions.

While earlier acquisition research often focused on either the acquirer or the target side of analysis, recent work has increasingly emphasized the need to understand the dyadic interrelationship between the target and the acquirer. This review aims at synthesizing research progress in the area of target–acquirer interrelationships and understanding what questions remain unanswered. The author organizes this review into three dimensions of target–acquirer interrelationship: (a) their relative attributes (what both parties are relative to each other), (b) their connections (what both parties have with each other), and (c) their interactions (what both parties do to each other). Based on the review, the author then identifies critical research gaps and opportunities for developing a more comprehensive understanding of the interrelationship between the target and the acquirer in acquisitions.

A new era of M&A is emerging, characterized by new wave of strategic investment decision-making practices (SIDMP) toward Industry 4.0 (I4.0) technologies and circular economy. The digital technologies play a significant role in circular economy transitions and companies’ performance This includes investment in capability development, vertical and horizontal integration, effective procurement practices, and effective strategic control mechanisms. The circular economy strategy is more than just recycling and environmental concerns. It unlocks new strategies and new ways of strategic thinking. Its rapid expansion, as a new norm for companies, has characteristics of a fast-expanding market, given its exponential growth. Yet, there is a need to boardrooms commitment and responsibilities including oversight and support and a full-integrated organizational structure, sales, logistics, marketing, production, development, design, supply management, finance, human resources, and legal. To achieve successful implementation of SIDMP and M&A, companies should gather information on environmental, social, and governance issues. Therefore, it is critical to prioritize their strategies and identify areas that present the greatest risk on environmental and social issues including human rights, labor, and ethical issues in the companies supply chain. By creating shared values between society and shareholders, companies can maintain long-term success, legitimacy, and credibility. This chapter offers debate on recent developments in research and practice regarding SIDMP and synergy between I4.0 and circular economy.

In this chapter, the authors draw insights from the literature on institutional distance and examine whether firms engaging in cross-border acquisitions overcome the liability of foreignness by using external advisors. Specifically, the authors argue that acquiring and target firms may alleviate heightened information asymmetries and transaction costs by leveraging the information-production and uncertainty-reduction roles of M&A advisors. Using a global sample of cross-border M&As from 2001 to 2020, the results suggest that institutional distance triggers both acquirers and targets to use M&A advisors. Among the four types of institutional distance the authors examined, cultural distance – and to a lesser extent administrative distance – greatly contributes to the use of various types of advisors in cross-border deals. Interestingly, although both parties in the transaction rely on advisors to overcome distance barriers, acquiring firms appear to hire advisors more often than target firms.

We consider conditions under which firms hire an intermediary advisor in acquisition deals. Although acquirers pay large advisory fees to investment banks for their assistance in acquisitions, we know little about the conditions under which acquirers form a relationship with an investment bank for an acquisition deal. Specifically, we examine the role of overall acquisition experience, acquisition experience specific to the target’s industry, prior relationship-specific experience, and deal size in relationship formation and continuation. We test their hypotheses using a dataset of US-based acquirers and targets between 1991 and 2015. Our findings provide nuanced insights into the role of acquisition experience for acquirer–investment bank pairing up on acquisition deals.

The M&A literature lacks coherence and consistency when explaining the role of CEO power in influencing post-acquisition firm performance in both theoretical and empirical terms. This study uses meta-analytic techniques to quantitatively synthesize and evaluate the impact of 11 CEO power constructs (CEO duality; compensation; ownership; founder CEO; acquisition experience; functional area experience; outside directorship; elite education; CEO celebrity; age; and tenure) on acquiring firms’ post-acquisition performance. Results of 85 independent studies show that CEO ownership, functional area experience, and tenure are significantly positive predictors for better acquisition performance. At the same time, CEO duality and CEO elite education are significantly negative predictors of different measures of acquisition performance. These findings indicate the importance of integrating different theories to enhance our understanding of the nature of strategic leadership in acquisition performance.