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Managing
the Merger
Point Summary
Links
Mergercoach.com,
online assistance for merger integration from Integrated ChangeWare
Systems.
Books and Articles
Dennis
Carey, “A CEO roundtable on making mergers succeed,” Harvard
Business Review, May/Jun 2000, 78 (3), pp.145-154.
A
roundtable discussion regarding mergers and acquisitions by a group of
chief executives who all have deep experience in making deals work is
presented. Participants include: 1. Alex Mandl, Chairman and CEO of
Teligent, 2. David Bohnett, cofounder and CEO of GeoCities, and 3. Ed
Liddy, chairman and CEO of Allstate.
Sylvia
DeVoge and Scott Spreier, “The Soft Realities of Mergers,” Across the
Board, November-December, 1999, pp. 27-32.
Robert
M. Fulmer, “Blending Corporate Families: Management And Organization
Design,” Academy of Management Executive, November, 1988, 2 (4),
pp. 275-284.
Major
areas of conflict in postmerger corporate settings are reviewed and
compared to the problems often observed in blended families.
Discussions with over 200 executives involved in merged organizations
revealed extensive use of language commonly associated with romance,
marriage, and family struggles. In particular, reactions of
executives to mergers resembled
children's reactions to a parent's 2nd marriage and involved 5 themes:
1. anxiety and uncertainty, 2. helplessness and rejection,
3. divided loyalties, 4. withdrawal and avoidance, and 5.
conflicts over new values. Managing
the blended corporate family involves 5 areas: 1. new structure
and systems, 2. the power of outsiders, 3. territorial
battles, 4. defining family membership, and 5. start-up
problems. Although firms can achieve increased sales and profits
through mergers, like premarital counseling, premerger analysis can
assist in reaching the goal of day-to-day compatibility.
Pankaj
Ghemawat, “The dubious logic of global megamergers,” Harvard
Business Review, Jul/Aug, 2000, 78 (4),
pp. 64-72.
The
almost universal belief among executives today is bigger is better:
companies are entering into huge, pricey, cross-border mergers at
an unprecedented rate. In this article, the myth of increased
concentration is debunked; the perceived links between the globalization
of an industry and the concentration of that industry are weak.
Michael Lubatkin, “Value-Creating Mergers: Fact
Or Folklore?” Academy of Management Executive, November, 1988, 2
(4), pp. 295 – 303.
According to the popular business press,
corporate mergers do not createvvalue for acquiring firms; however, a
growing body of literature challenges this widely held belief. The
key to a merger's worth is whether it creates a competitive advantage to
a firm's business, best achieved when a firm combines business units
linked by core technologies. Evidence shows that unrelated mergers
offer fewer advantages and are thus usually less valuable to
shareholders than related mergers. Moreover, merger effectiveness
increases when shareholder returns are increased and risks reduced.
However, both related and unrelated mergers have been shown to increase
business risk. To improve the effectiveness of mergers, 4 practical
points are suggested: 1. Estimate cash inflow of competitive
advantage. 2. Estimate costs of sharing strategic
capabilities. 3. Estimate value added. 4.
Communicate with investors.
Michael
Lubatkin and Ronald E. Shrieves, “Towards Reconciliation of Market
Performance Measures to Strategic Management,” Academy of Management
Review, July, 1986, 11 (3), pp. 497-513.
Two
bodies of research concerning mergers have developed in the fields of
management and finance. However, similar conclusions are not
usually reached in these fields. Strategic management literature
suggests that mergers may improve the performance of the acquiring firm.
The finance literature, on the other hand, indicates that mergers do not
lead to positive performance outcomes. Despite their differences,
the principal empirical methodology used in finance studies can be
adapted to researchers in management. To make this possible, 4
research issues are discussed. These include differences in: 1.
time frame, 2. sampling frame, 3. statistical methods, and
4. abnormal performance analysis. In the context of these
issues
5 inappropriate procedures are replaced with alternative procedures that
reconcile the basic market-based performance measures to the research
objectives of strategic management.
Mitchell Lee Marks, "Mixed Signals: If You Want to Avoid Them,
Don't Say Merger When Your Mean Acquisition," Across the Board,
May, 2000, pp. 21-25.
Mitchell
Lee Marks and Philip H. Mirvis, Joining
Forces: Making 1+1=3 in Mergers, Alliances, and Acquisitions.
San Francisco: Jossey-Bass, 1997.
Philip
H. Mirvis and Mitchell Lee Marks, Managing
the Merger : Making it Work. Englewood
Cliffs, N.J.: Prentice Hall, 1992.
David
Mitchell and Garrick Holmes, Making
Acquisitions Work. Economist
Intelligence Unit, 1996.
Afsaneh
Nahavandi and Ali R. Malekzadeh, “Acculturation in Mergers and
Acquisitions,” Academy of Management Review, January, 1988, 13
(1), pp. 79-91.
Corporations
seeking diversity and growth frequently are turning to mergers.
The effectiveness of this strategy depends upon careful
planning and implementation, but the failure rate of mergers suggests
that there is a lack of understanding of the variables involved in
planning a merger. A model that focuses on the adaptation and
acculturation in mergers and acquisitions is introduced.
It is proposed that, when 2 firms agree on the preferred method of
acculturation for the implementation of a merger, less acculturative
tension and organizational resistance will result, making the
acculturation process smoother. Incongruence occurs when the 2
organizations do not agree on the method of acculturation and can lead
to a great deal of acculturative stress. As a result of
incongruence, important managers and other valuable employees may leave
the organization, and active resistance to the adoption of any of the
acquirer's systems may occur.
Mike
W. Peng and Peggy Sue Health, “The growth of the firm in planned
economies in transition: Institutions, organizations, and strategic
choice,” Academy of Management Review, April, 1996, 21 (2), pp.
492-528.
Highlighting
an important facet of diversity among organizations operating in
different institutional environments, a paper presents a model of the
growth strategy of the firm in planned economies in transition such as
Eastern Europe, the former Soviet republics, and China. Focusing
on the stylized state-owned enterprises, the interaction between
institutions and organizations in these countries is explored.
Given the institutional constraints, neither generic expansion nor
acquisitions, 2 traditional strategies for growth found in the West, are
viable for firms in these countries. Instead, firms settle on a
network-based strategy of growth, building on personal trust and
informal agreements among managers. The institutional environment
that leads to this unique strategy of growth is examined, and boundary
conditions, limitations, and implications of this model are discussed.
Kannan
Ramaswamy, “The performance impact of strategic similarity in horizontal
mergers: Evidence from the U.S. banking industry,” Academy of
Management Journal, June, 1997, 40 (3), pp. 697-715.
A
study examined the impact of strategic similarities between target and
bidder firms on changes in postmerger performance. Set in the US
banking industry, the empirical examination shows that mergers between
banks exhibiting similar strategic characteristics result in better
performance than those involving strategically dissimilar banks.
Jeffrey A. Schmidt, editor, Making
Managers Work: The Strategic Importance of People. Alexandria, Va.:
Society for Human Resource Management, 2001; http://www.shrm.org/shrmstore).
Case
Studies
Ronald N.
Ashkenas and Lawrence J. DeMonaco and Suzanne C. Francis, “Making the deal
real: How GE Capital integrates acquisitions,” Harvard Business
Review, Jan/Feb, 1998, 76 (1), pp.165-178.
Even as
the number of mergers and acquisitions rises in the US, studies show the
performance of the resulting companies falls below industry averages more
often than not. To improve these statistics, executives need to view
acquisition integration as a manageable process, not a unique event. GE
Capital Services has assimilated more than 100 acquisitions in the past 5
years alone and has developed a formal model for melding new acquisitions into
the corporate fold. Four lessons from the company's successful run are
presented: 1. Begin the integration process before the deal is
signed. 2. Dedicate a full-time individual to managing the
integration process. 3. Implement any necessary restructuring
sooner rather than later. 4. Integrate not only business
operations but also corporate cultures.
Sarah
Cliffe, “Can this merger be saved?” Harvard Business Review, Jan/Feb,
1999, 77 (1), pp. 28-44.
A
fictional case study discusses a merger that looked like a marriage made in
heaven to those at corporate headquarters and how it is feeling like an
infernal union to those on the ground. Six commentators explain how an
employee can bring peace and prosperity to the newly merged companies.
The commentators are: 1. Bill Paul of DelTech
Consulting, 2. J. Brad McGee of Tyco International, 3. Jill
Greenthal of Donaldson, Lufkin, & Jenrette, 4. Dale Matschullat of
Newell Company, 5. Daniel Vasella of Novartis and 6. Albert J.
Viscio of Booz-Allen & Hamilton.
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