Skip to main content
SpringerLink
Log in
Book cover

Experience and Learning in Corporate Acquisitions pp 91–124Cite as

Palgrave Macmillan

Mergers and Acquisitions as Strategic Decisions

  • Chapter
  • First Online:

  • 774 Accesses

Abstract

This chapter provides an overview of mergers and acquisitions as strategic decisions that enable corporate renewal. After identifying their distinctive features vis-à-vis other strategic resource allocation decisions, the sources of value creation are analyzed and the concept of value creation is distinguished across the capital markets school, the strategic school, the organization behavior school, and the process perspective. The chapter further examines the notion of value in mergers and acquisitions by including the concepts of value appropriation and value destruction. The analysis then moves to establishing a linkage between acquisitions and a firm’s corporate strategy. Finally, the chapter covers the role of experience and learning in mergers and acquisitions as a pervasive force driving both decision-making and integration aspects.

This is a preview of subscription content, log in via an institution.

Chapter
USD   29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD   79.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD   99.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD   129.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Learn about institutional subscriptions

Notes

  1. 1.

    These types of M&A retrace the classification proposed by Kitching (1967). Kitching actually identified a fourth typology, that is, the concentric acquisition, which occurs when acquirer and target either share the same technology but have different customers or, vice versa, share the same customers but with different technologies.

  2. 2.

    The related -complementary and related -supplementary acquisition types were identified by Salter and Weinhold (1980) as a resource-based set of acquisition strategies and were later adopted by Wernerfelt (1984). Wernerfelt (1984) defined related -complementary as an acquisition strategy that allows for getting resources that combine effectively with those already possessed by the firm, and related-supplementary, in contrast, as an acquisition strategy that allows for getting more of already existing resources.

References

  • Adler, Paul S., and Seok-Woo Kwon. 2002. Social Capital: Prospects for a New Concept. Academy of Management Review 27: 17–40.

    Article  Google Scholar 

  • Anand, Bharat N., and Tarun Khanna. 2000. Do Firms Learn to Create Value? The Case of Alliances. Strategic Management Journal 21: 295–315.

    Article  Google Scholar 

  • Ansoff, H. Igor. 1957. Strategies for Diversification. Harvard Business Review 35: 113–124.

    Google Scholar 

  • Arikan, Asli M., and Anita M. McGahan. 2010. The Development of Capabilities in New Firms. Strategic Management Journal 31: 1–18.

    Article  Google Scholar 

  • Baker, H. Kent, and Victor Ricciardi. 2014. Investor Behavior – The Psychology of Financial Planning and Investing. Hoboken, NJ: John Wiley & Sons Inc.

    Book  Google Scholar 

  • Barkema, H.G., and M. Schijven. 2008. How Do Firms Learn to Make Acquisitions? A Review of Past Research and an Agenda for the Future. Journal of Management 34: 594–634.

    Article  Google Scholar 

  • Barkema, Harry G., John H.J. Bell, and Johannes M. Pennings. 1996. Foreign Entry, Cultural Barriers, and Learning. Strategic Management Journal 17: 151–166.

    Article  Google Scholar 

  • Berry, John W. 1980. Social and Cultural Change. In Handbook of Cross-Cultural Psychology, ed. H.C. Triandis and R.W. Brislin, vol. 5, 211–279. Boston: Allyn & Bacon.

    Google Scholar 

  • Birkinshaw, Julian, Henrik Bresman, and Lars Håkanson. 2000. Managing the Post-Acquisition Integration Process: How the Human Integration and Task Integration Processes Interact to Foster Value Creation. Journal of Management Studies 37: 395–425.

    Article  Google Scholar 

  • Bower, Joseph L. 2001. Not All M&As Are Alike – And That Matters. Harvard Business Review 79: 92–101.

    Google Scholar 

  • Capron, Laurence, Pierre Dussauge, and Will Mitchell. 1998. Resource Redeployment Following Horizontal Acquisitions in Europe and North America, 1988–1992. Strategic Management Journal 19: 631–661.

    Article  Google Scholar 

  • Casciaro, Tiziana, and Mikoɨai J. Piskorski. 2005. Power Imbalance, Mutual Dependence, and Constraint Absorption: A Closer Look at Resource Dependence Theory. Administrative Science Quarterly 50: 167–199.

    Article  Google Scholar 

  • Cohen, Wesley M., and Daniel A. Levinthal. 1990. Absorptive Capacity: A New Perspective on Learning and Innovation. Administrative Science Quarterly 35: 128–153.

    Article  Google Scholar 

  • Datta, Deepak K. 1991. Organizational Fit and Acquisition Performance: Effects of Post-Acquisition Integration. Strategic Management Journal 12: 281–297.

    Article  Google Scholar 

  • Eschen, Erik, and Rudi K.F. Bresser. 2005. Closing Resource Gap: Toward a Resource-Based Theory of Advantageous Mergers and Acquisitions. European Management Review 2: 167–178.

    Article  Google Scholar 

  • Gates, Stephen, and Philippe Very. 2003. Measuring Performance during M&A Integration. Long Range Planning 36: 167–185.

    Article  Google Scholar 

  • Grant, Robert M. 1996. Toward a Knowledge-Based Theory of the Firm. Strategic Management Journal 17: 109–122.

    Article  Google Scholar 

  • Harford, Jarrad, and Kai Li. 2007. Decoupling CEO Wealth and Firm Performance: The Case of Acquiring CEOs. The Journal of Finance 62: 917–949.

    Article  Google Scholar 

  • Hashai, N., and A. Delios. 2012. Balancing Growth across Geographic Diversification and Product Diversification: A Contingency Approach. International Business Review 21: 1052–1064.

    Article  Google Scholar 

  • Haspeslagh, Philippe C., and David B. Jemison. 1991. Managing Acquisitions: Creating Value through Corporate Renewal. New York: Free Press.

    Google Scholar 

  • Hawley, Amos H. 1950. Human Ecology. New York: Ronald Press.

    Google Scholar 

  • Hayward, Mathew L.A., and Donald C. Hambrick. 1997. Explaining the Premiums Paid for Large Acquisitions: Evidence of CEO Hubris. Administrative Science Quarterly 42: 103–127.

    Article  Google Scholar 

  • Hitt, Michael A., David King, Hema Krishnan, Marianna Makri, Mario Schijven, Katsuhiko Shimizu, and Hong Zhu. 2012. Creating Value through Mergers and Acquisitions: Challenges and Opportunities. In The Handbook of Mergers and Acquisitions, ed. David Faulkner, Satu Teerikangas, and Richard J. Joseph, 71–113. Oxford: Oxford University Press.

    Chapter  Google Scholar 

  • Jemison, David B., and Sim B. Sitkin. 1986. Corporate Acquisitions: A Process Perspective. Academy of Management Review 11: 145–163.

    Article  Google Scholar 

  • Jensen, Michael C. 1986. Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. American Economic Review 76: 323–329.

    Google Scholar 

  • Jensen, Michael C., and William H. Meckling. 1976. Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics 3: 305–360.

    Article  Google Scholar 

  • Kim, E. Han, and Vijay Singal. 1993. Mergers and Market Power: Evidence from the Airline Industry. The American Economic Review 83: 549–569.

    Google Scholar 

  • King, Adelaide Wilcox, and Carl P. Zeithaml. 2001. Competencies and Firm Performance: Examining the Causal Ambiguity Paradox. Strategic Management Journal 22: 75–99.

    Article  Google Scholar 

  • Kitching, John. 1967. Why Do Mergers Miscarry? Harvard Business Review 45: 84–101.

    Google Scholar 

  • Kogut, Bruce, and Udo Zander. 1992. Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology. Organization Science 3: 383–397.

    Article  Google Scholar 

  • ———. 1993. Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation. Journal of International Business Studies 24: 625–645.

    Article  Google Scholar 

  • Kolev, Kalin, Jerayr Haleblian, and Gerry McNamara. 2012. A Review of the Merger and Acquisition Wave Literature: History, Antecedents, Consequences, and Future Directions. In The Handbook of Mergers and Acquisitions, ed. David Faulkner, Satu Teerikangas, and Richard J. Joseph, 19–39. Oxford: Oxford University Press.

    Chapter  Google Scholar 

  • Krishnan, Hema A., Michael A. Hitt, and Daewoo Park. 2007. Acquisition Premiums, Subsequent Workforce Reductions and Post-Acquisition Performance. Journal of Management Studies 44: 709–732.

    Article  Google Scholar 

  • Kumar, Shyam. 2009. The Relationship between Product and International Diversification: The Effects of Short-Run Constraints and Endogeneity. Strategic Management Journal 30: 99–116.

    Article  Google Scholar 

  • Larsson, Rikard, and Michael Lubatkin. 2001. Achieving Acculturation in Mergers and Acquisitions: An International Case Survey. Human Relations 54: 1573–1607.

    Article  Google Scholar 

  • Lippman, Steven A., and Richard P. Rumelt. 1982. Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition. The Bell Journal of Economics 13: 418–438.

    Article  Google Scholar 

  • Lubatkin, Michael, Roland Calori, Philippe Very, and John F. Veiga. 1998. Managing Mergers across Borders: A Two-Nation Exploration of a Nationally Bound Administrative Heritage. Organization Science 9: 670–684.

    Article  Google Scholar 

  • Malmendier, Ulrike, and Geoffrey Tate. 2005. CEO Overconfidence and Corporate Investments. The Journal of Finance 60: 2661–2700.

    Article  Google Scholar 

  • March, James G. 1991. Exploration and Exploitation in Organizational Learning. Organization Science 2: 71–87.

    Article  Google Scholar 

  • Mayer, Michael C.J., Christian Stadler, and Julia Hautz. 2015. The Relationship between Product and International Diversification: The Role of Experience. Strategic Management Journal 36: 1458–1468.

    Article  Google Scholar 

  • McSweeney, Brendan, and Elina Happonen. 2012. Pre-Deal Management. In The Handbook of Mergers and Acquisitions, ed. David Faulkner, Satu Teerikangas, and Richard J. Joseph, 171–194. Oxford: Oxford University Press.

    Chapter  Google Scholar 

  • Morck, Randall, Andrei Shleifer, and Robert W. Vishny. 1990. Do Managerial Objectives Drive Bad Acquisitions? The Journal of Finance 45: 31–48.

    Article  Google Scholar 

  • Nahavandi, Afsaneh, and Ali R. Malekzadeh. 1988. Acculturation in Mergers and Acquisitions. Academy of Management Review 13: 79–90.

    Article  Google Scholar 

  • Napier, Nancy K. 1989. Mergers and Acquisitions, Human Resource Issues and Outcomes: A Review and Suggested Typology. Journal of Management Studies 26: 271–290.

    Article  Google Scholar 

  • Penrose, Edith. 1959. The Theory of the Growth of the Firm. Oxford: Oxford University Press.

    Google Scholar 

  • Pfeffer, Jeffrey, and Gerald R. Salancik. 1978. The External Control of Organizations: A Resource Dependence Perspective. Stanford: Stanford University Press.

    Google Scholar 

  • Qian, Gongming. 2002. Multinationality, Product Diversification, and Profitability of Emerging US Small and Medium-Sized Enterprises. Journal of Business Venturing 17: 611–633.

    Article  Google Scholar 

  • Reus, Taco H. 2012. A Knowledge-Based View of Mergers and Acquisitions Revisited: Absorptive Capacity and Combinative Capability. In Advances in Mergers and Acquisitions, ed. Sydney Finkelstein and Cary L. Cooper, vol. 11, 69–88. Bingley: Emerald Group Publishing Limited.

    Chapter  Google Scholar 

  • Roll, Richard. 1986. The Hubris Hypothesis of Corporate Takeovers. The Journal of Business 59: 197–216.

    Article  Google Scholar 

  • Ross, Stephen A. 1973. The Economic Theory of Agency: The Principal’s Problem. American Economic Association 63: 134–139.

    Google Scholar 

  • Salter, Malcolm S., and Wolf A. Weinhold. 1980. Diversification by Acquisition. New York: Free Press.

    Google Scholar 

  • Schweiger, David M., and James P. Walsh. 1990. Mergers and Acquisitions: An Interdisciplinary View. Research in Personnel and Human Resources Management 8: 41–107.

    Google Scholar 

  • Shelton, Lois M. 1988. Strategic Business Fits and Corporate Acquisition: Empirical Evidence. Strategic Management Journal 9: 279–287.

    Article  Google Scholar 

  • Shimizu, Katsuhiko, Michael A. Hitt, Deepa Vaidyanath, and Vincenzo Pisano. 2004. Theoretical Foundations of Cross-Border Mergers and Acquisitions: A Review of Current Research and Recommendations for the Future. Journal of International Management 10: 307–353.

    Article  Google Scholar 

  • Singh, Harbir, and Cynthia A. Montgomery. 1987. Corporate Acquisition Strategies and Economic Performance. Strategic Management Journal 8: 377–386.

    Article  Google Scholar 

  • Straub, Thomas, Stefano Borzillo, and Gilbert Probst. 2012. A Decision-Making Framework to Analyze Important Dimensions of M&A Performance. In Advances in Mergers and Acquisitions, ed. Sydney Finkelstein and Cary L. Cooper, vol. 11, 199–235. Bingley: Emerald Group Publishing Limited.

    Chapter  Google Scholar 

  • Sudarsanam, Sudi. 2012. Value Creation and Value Appropriation in M&A Deals. In The Handbook of Mergers and Acquisitions, ed. David Faulkner, Satu Teerikangas, and Richard J. Joseph, 195–253. Oxford: Oxford University Press.

    Chapter  Google Scholar 

  • Teece, David J., Gary Pisano, and Amy Shuen. 1997. Dynamic Capabilities and Strategic Management. Strategic Management Journal 18: 509–533.

    Article  Google Scholar 

  • Teerikangas, Satu, Richard J. Joseph, and David Faulkner. 2012. Mergers and Acquisitions: A Synthesis. In The Handbook of Mergers and Acquisitions, ed. David Faulkner, Satu Teerikangas, and Richard J. Joseph, 661–685. Oxford: Oxford University Press.

    Chapter  Google Scholar 

  • Thomas, James B., and Linda Klebe Trevino. 1993. Information Processing in Strategic Alliance Building: A Multiple-Case Approach. Journal of Management Studies 30: 779–814.

    Article  Google Scholar 

  • Villalonga, Belen, and Anita M. McGahan. 2005. The Choice among Acquisitions, Alliances, and Divestitures. Strategic Management Journal 26: 1183–1208.

    Article  Google Scholar 

  • Wally, Stefan, and J. Robert Baum. 1994. Personal and Structural Determinants of the Pace of Strategic Decision Making. Academy of Management Journal 37: 932–956.

    Google Scholar 

  • Weber, Yaakov, and Shlomo Yedidia Tarba. 2010. Human Resource Practices and Performance of Mergers and Acquisitions in Israel. Human Resource Management Review 20: 203–211.

    Article  Google Scholar 

  • Wernerfelt, Birger. 1984. A Resource-Based View of the Firm. Strategic Management Journal 5: 171–180.

    Article  Google Scholar 

  • Winter, Sidney G. 2003. Understanding Dynamic Capabilities. Strategic Management Journal 24: 991–995.

    Article  Google Scholar 

  • Yan, Aimin, and Barbara Gray. 1994. Bargaining Power, Management Control, and Performance in United States-China Joint Ventures: A Comparative Case Study. Academy of Management Journal 37: 1478–1517.

    Google Scholar 

  • Zaheer, Srilata. 1995. Overcoming the Liability of Foreignness. Academy of Management Journal 38: 341–363.

    Google Scholar 

  • Zollo, Maurizio. 2009. Superstitious Learning with Rare Strategic Decisions: Theory and Evidence from Corporate Acquisitions. Organization Science 20: 894–908.

    Article  Google Scholar 

  • Zollo, Maurizio, and Sidney G. Winter. 2002. Deliberate Learning and the Evolution of Dynamic Capabilities. Organization Science 13: 339–351.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Università Cattolica del Sacro Cuore, Piacenza, Italy

    Ilaria Galavotti

Authors
  1. Ilaria Galavotti
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

Copyright information

© 2019 The Author(s)

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Galavotti, I. (2019). Mergers and Acquisitions as Strategic Decisions. In: Experience and Learning in Corporate Acquisitions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-94980-2_3

Download citation

Publish with us

Policies and ethics

Search

Navigation