Thomas Straub (auth.)'s Reasons for Frequent Failure in Mergers and Acquisitions: A PDF

By Thomas Straub (auth.)

Despite the aim of functionality development, effects from mergers and acquisitions (M&A) are frequently disappointing. a number of empirical stories convey excessive failure charges of M&A bargains. reviews are ordinarily enthusiastic about person determinants. The literature for that reason lacks a extra complete framework that comes with assorted views.

utilizing 4 statistical tools, Thomas Straub indicates that M&A functionality is a multi-dimensional functionality. For a winning deal, the next key luck components will be taken under consideration:
• Strategic common sense that is mirrored via six determinants: marketplace similarities, marketplace complementarities, operational similarities, operational complementarities, marketplace strength, and buying strength.
• Organizational integration that's mirrored by means of 3 determinants: acquisition adventure, relative dimension, cultural compatibility.
• monetary / fee viewpoint that's mirrored by means of 3 determinants: acquisition top class, bidding method, and due diligence.
All 12 variables are presumed to impact functionality both definitely or negatively. Post-M&A functionality is measured via synergy consciousness, relative functionality (compared to competition), and absolute performance.

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The theory of economies of scale is based on decreasing marginal production costs while increasing the output volume (Hughes et aI. 1980) through which plant-specific and product-specific economies of scale can be achieved. If a company is below the minimum efficient size, it can decrease its costs by increasing or reorganizing its manufacturing output after an M&A. Cost savings can also be obtained because a bigger production volume allows the utilization of another, more efficient manufacturing technology.

Using this point of view, and after doing widespread research, capital market researchers have concluded that M&As do not usually increase the acquiring company’s shareholder value. Similar 10 For a review of the agency theory and its application in strategic and organizational research, see Eisenhardt (1989). 11 Manne (1965) was the first to establish the concept of a market for corporate control, and suggested that the control of companies possibly constitute an important asset, that there is a functioning market for corporate control and that many M&As are possibly the outcome of its successful function.

1980), and managerial motives (the managerial or agency as well as the empire-building theories). Meanwhile, the number of potential merger motives has been increased by approaches that consider capital markets’ lack of efficiency as the fundamental cause of M&As. The following discussion of the most important theories does not, however, group the different approaches, but presents them independently. Every explanation includes a short description of the major motives for M&As as well as the relevant empirical evidence.

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