Mergers between professional services firms: Exploring an undirected process of integration

Abstract

Research on mergers and acquisitions focuses almost exclusively on manufacturing and retail services firms. Professional services firms (PSFs) have been largely ignored, yet they present a distinctive managerial challenge. In PSFs, the key value-creating resources (technical knowledge and client relationships) are often proprietary to individuals, who may enjoy considerable operational autonomy within their firm. The challenge for senior managers is to persuade professional staff to remain with the firm and to share these resources with their merger partner colleagues. This chapter reports the results of a series of inductive, in-depth, longitudinal case studies of both mergers and acquisitions in the context of PSFs. It identifies an undirected model of organizational integration, termed the High School Dance model, where managerial action is highly constrained and where the pace and extent of integration is determined by professional staff throughout the combining firms. The study questions some of the fundamental assumptions within the mergers and acquisitions literature concerning the role of managers and the response of employees. It demonstrates that, in both mergers and acquisitions, the pace and extent of integration is determined by professional staff throughout both of the combining PSFs. In this context, managerial action is highly constrained, regardless of the formal authority structure, as ultimate power resides with those who embody the key intangible resources.

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