Toward unlocking the full potential of acquisitions

Toward unlocking the full potential of acquisitions (etc.) (Barkema/Schijven)

Academy of Management Journal 51 (2008), pp 696-722

This article focuses on how acquisitions can be undertaken more successful.

Earlier studies suggest that a successful acquisition was dependent on

• The strategic fit between the two parties in the acquisition, complementarily or resource similarity

• The organizational fit, the effective integration of both parties. These studies stated that strategic fit creates merely synergistic potential, rather than synergy realization.

Acquisition is not an isolated event, but merely one part of an overarching sequence of acquisitions. Earlier research always assumed firms started with a clean slate every acquisition. This is not the case however. Two themes that play part are the search and organizational learning.

The search project for new acquisitions is subject to the bounded rationality of managers. They are forced to look for solutions that are more satisfactory rather than optimal. This leads them to engage in more often in local search. When local search fails, they go after a more distant search. This will lead to accumulating organizational inefficiencies. Organizational restructuring is defined as increasing the efficiency and effectiveness of management teams through significant changes in the organizational structure.

Through organizational learning, practices become more routinized and refined. Firms are likely to adapt the same strategy for every acquisition when they believe it is the most efficient.

Acquirers go through long-term cycles of acquisitive growth and organizational restructuring. The contribution of a given acquisition to an acquirer’s performance depends on the acquisition’s position within the sequence. This sequence of acquisitions gradually increases the demand for major organizational restructuring, and this restructuring leads to more fully realizing the acquisition’s potential.

Firms can develop a restructuring capability, although extant theory predicts that it is difficult for them to do, since restructuring occurs infrequently and are highly heterogeneous and causally ambiguous.

Whereas acquisition experience allows a firm to learn to search locally for effective approaches to integrating each acquisition individually, restructuring experience may enable it to learn to engage in distant search for effective ways of integrating an acquiring firm as a whole. It will cost some time, but in the long term restructuring will lead to a more fully unlocking of the synergistic performance and increase its performance.