Merger and acquisition motives and outcome assessment

• Published date: 01 July 2018
• Author: Ulrike Mayrhofer,Ibne Hassan,Pervez N. Ghauri
• Date: 01 July 2018
• DOI: http://doi.org/10.1002/tie.21967

DIMENSIONS OF INTERNATIONAL BUSINESS

Merger and acquisition motives and outcome assessment

Ibne Hassan

1

| Pervez N. Ghauri

2

| Ulrike Mayrhofer

3

1

UHY Hassan Naeem & Co., Lahore, Pakistan

2

Birmingham Business School, University of

Birmingham, Birmingham, UK

3

IAE Lyon, Magellan Research Center, Jean

Moulin Lyon University, Lyon, France

Correspondence

Ulrike Mayrhofer, IAE Lyon, Magellan

Research Center, Jean Moulin Lyon

University, 6 cours Albert Thomas, 69008

Lyon, France.

Email: ulrike.mayrhofer@univ-lyon3.fr

Research on merger and acquisition (M&A) outcome often focuses on tangible financial results

and the reaction of stock markets. This research attempts to provide a more accurate assess-

ment of M&A performance by linking tangible as well as intangible M&A motives to outcome

assessment. The theoretical framework is based on evaluation theory. We analyze four case

studies of international M&As conducted by European companies. The findings indicate that

M&A outcome can be more accurately measured by aligning it with the motives defined by the

acquiring firms. They suggest that M&A outcome assessment should be considered as a pro-

cess covering both premerger and postmerger stages.

KEYWORDS

mergers and acquisitions, motives, outcome assessment, performance criteria, process

research

1|INTRODUCTION

Mergers and acquisitions (M&As) are significant for companies

involved in the deals, but also for national economies and industrial

structures (Buckley & Ghauri, 2002; Caiazza, Shimizu, & Yoshikawa,

2017). Strategically, they reconfigure industries, reshape corporate

structures, transform organizational cultures, and affect individual

careers (Marks & Mirvis, 2001). In contrast with the important vol-

ume of transactions taking place across the world, available studies

indicate that M&As do not necessarily enhance the value of acquiring

firms. For example, Bertrand and Betschinger (2012) show that

M&As increase the value of target firms, while the outcome is less

clear for acquirers. Several scholars argue that factors used for per-

formance measurement are inaccurate, which may explain inconsis-

tencies in empirical findings (Berkovitch & Narayanan, 1993;

Brouthers, van Hastenburg, & van den Ven, 1998; Deng, 2010; Lin &

Chou, 2016).

The terms merger and acquisition are often used as synonyms,

even if there exist some differences between the two types of

operation: in a merger, two companies agree to form one single

company (both companies lose their independence), whereas in an

acquisition, one company purchases another firm (and thus becomes

its owner). M&A research has remained under criticism for insuffi-

cient theory development (Faulkner, Teerikangas, & Joseph, 2012;

Schweiger & Goulet, 2001). The debates in the literature concern

questions related to how M&A outcome is measured (Meglio &

Risberg, 2011; Very, 2011; Zollo & Meier, 2008), how M&As per-

form (King, Dalton, Daily, & Covin, 2004; Trichterborn, Knyphausen-

Aufseß, & Schweizer, 2016), and which factors explain M&A perfor-

mance (Chalençon, 2017; Haleblian, Devers, McNamara, Carpenter, &

Davison, 2009). Trautwein (1990) suggests that research on M&As

should focus more on process-related aspects than on efficiency-

related issues.

This research attempts to contribute to a better understanding of

merger outcome (or performance) and its assessment (or measure-

ment). The objective is twofold: (a) to investigate how companies

define merger motives and whether they are used to assess merger

outcome, and (b) to determine if the alignment of merger motives

with merger outcome allows assessing performance in a more accu-

rate way. Our empirical study focuses on cross-border M&As involv-

ing acquirers and target companies from European countries and the

United States. It follows an exploratory research design (Denzin &

Lincoln, 2000; Ghauri & Grønhaug, 2010) and takes the form of four

case studies in the information and communications technology

industry. Data were mainly collected through semistructured inter-

views with key managers of acquiring firms and completed by the

analysis of internal and external documents.

The findings of our research indicate that M&A outcome can be

more accurately measured by aligning it with the motives defined by

the acquiring firm. They show that it is necessary to determine M&A

motives in an appropriate way and then link them with outcome

assessment factors. While several earlier studies are based on

DOI: 10.1002/tie.21967

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