Attributes of Successful and Unsuccessful Acquisitions of US Firms

Michael A. Hitt · Jeffrey S. Harrison · R. Duane Ireland · Aleta Best

355 citations0/0 files storedBritish Journal of Management

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Corporate Finance and Governance International Business and FDI Innovation and Knowledge Management

Abstract

Acquisitive growth strategies continue to be popular, in spite of increasing evidence that they often do not enhance the financial performance of acquiring firms and may adversely affect innovation. However, some acquisitions are associated with both increases in financial performance and a strengthened commitment to R&D while others experience decreases in both. Multiple theories have been offered to explain acquisitions and their outcomes, but few have received strong empirical support. This paper describes a multiple rater, multiple‐case study of acquisitions that had highly favourable outcomes and others that experienced highly unfavourable outcomes. All twelve of the high performing acquisitions studied were found to exhibit the dual characteristics of friendliness during acquisition negotiations and resource complementarities between the two firms. Additionally, debt played an important role in the success (low to moderate debt) or lack of success (high or extraordinary debt) in 21 of the 24 acquisitions studied. Inadequate target evaluation was a factor in 11 of the 12 acquisitions with low performance. Importantly, the results of both sets of acquisitions suggested that a configuration of attributes affected post‐acquisition performance. Other findings both supported and contradicted commonly held beliefs about acquisitions, as well as highlighted variables not typically associated with acquisition strategies. The study provides directions for future theory development and empirical research on acquisitions.

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References

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2002Pace, rhythm, and scope: process dependence in building a profitable multinational corporation 2004Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future 2001Resource complementarity in business combinations: Extending the logic to organizational alliances 2009Cross-border acquisition abandonment and completion: The effect of institutional differences and organizational learning in the international business service industry, 1981–2001 2008How Do Firms Learn to Make Acquisitions? A Review of Past Research and an Agenda for the Future

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