Success and failure in M&As: Is there a place for a paradigm change? Evidence from the Israeli hi-tech industry

• Authors: Ofer Zaks

Abstracts

EN

The consistent growth of mergers & acquisitions (M&As) activity around the world in the last decade, and the volume of capital involved in such transactions, stand in sharp contrast to the high failure rates evident in M&As. The inconsistency amongst empirical findings on M&A performance is based on a variety of settings and on different measurements investigated under the generic label ‘M&As’. This paper claims that we need to differentiate between general M&As and those involving technology firms acquisition. The combination of the drive, the dynamic process and the human capital capabilities which characterize the latter, is expected to result in a more successful result than was reported. Hi-tech innovative acquirers can benefit from buying small, start- up firms by adding valuable resources, increasing market power and initiating strategic renewal. It is proposed that in addition to the traditional critical success factors (CSFs) identified as the most influential variables on M&A performance, attention needs to be given to the acquired firms' motivation to succeed and to the performance of start-ups in the hi-tech sector. Some unique variables in that configuration need to be researched, amongst them are: trust, readiness for change, commitment, knowledge transfer and preserved autonomy. By doing that an opportunity will be given to examine if the general research paradigm of M&As fits the hi-tech’s circumstances or if a separate one is needed to measure the merger performance of start-ups. It is assumed that the Israeli's start-ups mergers represent a more successful case and that they will perform with more positive results. This paper presents a theoretical framework for investigating M&A performance in the hi-tech area through an interdisciplinary approach. The article is organized as follows: The first section outlines the various theoretical ideas and research done on M&As. The second part deals with some critical reviews that aim to explain the confusing data produced from that paradigm. Section three turns to the emerging area of the technological business environment highlighting the uniqueness of the Israeli start-up phenomena. The last section combines performance with hi-tech in order to provide new insights on the M&As processes for executives engaged in both planning and implementing M&A deals. The paper concludes with a short summary and practical recommendation for further research

Keywords

EN

mergers and acquisitions; performance measures; organizational performance; hi-tech industry

• Publisher: Uniwersytet Ekonomiczny w Poznaniu
• Journal: Economics and Business Review
• Year: 2016
• Volume: 2(16)
• Issue: 1

Contributors

author

Ofer Zaks

• Etz- Vadat, MTC, Moshav Gan – Sorek 7686500, Israel [e-mail]

References

• vram, D.O., Kuhne, S., 2008, Implementing responsible business behavior from a strategic management perspective: Developing a framework for Austrian SMEs, Journal of Business Ethics, vol. 82, no. 2.
• Agarwal, R., Helfat, E.C., 2009, Strategic Renewal of Organizations, Organization Science, vol. 20, no. 2, p. 281–293.
• Armenakis, A.A., & Bedeian, A.G., 1999, Organizational change: A review of theory and research in the 1990s, Journal of Management, vol. 25, p. 293-315.
• Ashkenas, R.N., DeMonaco, L.J., Francis, S., 1998, Making the Deal Real: How GE Capital integrates acquisitions. Harvard Business Review, Jan- Feb, p. 165-178.
• Baron, R.A., 1998, Cognitive mechanisms in entrepreneurship: why and when entrepreneurs think differently than other people, Journal of Business Venturing, vol. 13, p. 275-94.
• Bower, L.J., 2001, Not All M&As Are Alike—and That Matters, in mergers & acquisitions: a critical reader, Harvard Business Review.
• BCG- The Boston Consulting Group, 2005, Successful M&A: The Method in the Madness.
• Beckman, C.M., Haunschild R.P., 2002, Network Learning: The Effects of Partners' Heterogeneity of Experience on Corporate Acquisitions. Administrative Science Quarterly, vol. 47, no. 1, p. 92-124.
• Benou, J., Madura, J., 2005, High-tech acquisitions, firm specific characteristics and the role of investment bank advisors, Journal of High Technology Management Research, vol. 16, no. 1, p. 101-120.
• Bruderl, J., Preisendorfer, P., 1998, Network support and the success of newly founded business, Small Bus. Econ, vol.10, no. 2, p.213–225.
• Capron, L., 1999, The long-term performance of horizontal acquisitions, Strategic Management Journal, vol. 20 no. 11, p. 987-1018.
• Capron, L., Mitchell, W., 2009, Selection capability: how capability gaps and internal social frictions affect internal and external strategic renewal. Organization Science, vol. 20, no. 2, p. 294–312.
• Cardon, M.S., Zietsma, C., Saparito, P., et al., 2005, A tale of passion: New insights into entrepreneurship from a parenthood metaphor. Journal of Business Venturing, vol. 20, no. 1, p. 23-45.
• Castro, C., Neira, E., 2005, Knowledge transfer: Analysis of three Internet acquisitions. International Journal of Human Resource Management, vol.16, no. 1 p. 120–135.
• Cartwright, S., 2005, Mergers and acquisitions: an update and appraisal, in Hodgkinson, G.P. and Ford, J.K. [Eds], International Review of Industrial and Organisational Psychology, vol. 20, Wiley, Chicester, p. 1-38.
• Cartwright, S., et al. 2012, Methods in M&A—A look at the past and the future to forge a path forward, Scandinavian Journal of Management, vol. 28, no. 2, p. 95-106.
• Cartwright, S., Cooper, C.L. 1993, The role of culture compatibility in successful organizational marriage, Academy of Management Executive, vol. 7, no. 2, p. 57-70.
• Cartwright, S., Cooper, C.L., 2000, HR know how in Mergers and Acquisitions. London, Britain: Cromwell Press.
• Cartwright,S and Schoenberg,R(2006). 30 years of mergers and acquisitions research: Recent advances and future opportunities. British Journal of Management. Vol. 17, no. 1, p. 1-s50s.
• Chakrabarti, A., Hauschildt, J., Suverkrup, C, 1994. Does it pay to acquire technological firms? R&D Management, vol. 24, no.1, p. 47–56.
• Chorev, S., Anderson, A.R., 2006, Success in Israeli high-tech start-ups: critical factors and process, Technovation, vol. 26, no. 2, p. 162-74.
• Coff, R., 2003, Bidding wars over R&D-intensive firms: Knowledge, opportunism, and the market for corporate control, Academy of Management Journal, vol. 46, no.1, p. 74–86.
• Dalziel, M., 2008, The seller’s perspective on acquisition success: empirical evidence from the communications equipment industry, Journal of Engineering & Technology Management, vol. 25, no. 3, p. 168-183.
• Eisenhardt, K.M., Martin J.A., 2000, Dynamic capabilities: what are they? , Strategic Management Journal, vol. 21, no. 1, p. 1105-1121.
• Ellis, T., et al, 2012, Integration in large, related M & As: linkages between contextual factors, integration approaches and process dimensions, European J. International Management, vol. 6, no. 4, p. 368-394.
• Epstein, M.J., 2004, The drivers of success in post-merger integration, Organizational Dynamics, vol. 33, no.2, p. 174–189.
• Filion, L. J., 1990, Entrepreneurial performance, networking, vision and relations, Journal of Small Business and Entrepreneurship, vol. 7, no.3, p. 3-13.
• Fontenay, C., Carmel E., 2001, Israel’s Silicon Wadi: The Forces behind Cluster Formation, Stanford Institute for Economic Policy Research. Discussion Paper no. 00-40.
• Goldblatt, H., 1999, Ciscos’s secrets, Fortune, November 8: p.177–181.
• Gomes, E., Angwin, D., Weber, Y., Tarba, S. Y., 2013, Critical success factors through the mergers and acquisitions process: Revealing pre-and post-M&A connections for improved performance, Thunderbird Inter- national Business Review, vol. 55, no.1, p. 13–35.
• Gordon, B., Silicon Valley vs Silicon Wadi. Jerusalem Post, 5 July, 2000 [Israeli newspaper in English].
• Graebner, M. E., 2004. Momentum and serendipity: How acquired firm leaders create value in the integration of technology firms, Strategic Management Journal, vol. 25, no. 89, p. 751-777.
• Graebner, M. E., Eisenhardt, K. M., 2004, The seller’s side of the story: Acquisition as courtship and governance as syndicate in entrepreneurial firms, Administrative Science Quarterly, vol. 49, no. 3, p. 366-403.
• Grant-Thornton global dynamic index 2015, Going Beyond Borders.
• Hambrick, D.C., Cannella, A. A., 1993, Relative standing: A framework for understanding departures of acquired executives. Academy of Management Journal, vol. 36, no.4, p.733-762.
• Haspeslagh, P.C., Jemison, D.B., 1991. Managing acquisitions: Creating value through corporate renewal. New York: Free Press.
• Jagersma, P.K., 2005, Cross-border alliances: advice from the executive suite, Journal of business Strategy, vol. 26, no.1, p. 44-50
• King, D.R., Dalton, D.R., Daily, C.M., Covin, J.G., 2004, Meta-analyses of post-acquisition performance: Indications of unidentified moderators, Strategic Management Journal, vol. 25, p. 187-200.
• KPMG- Unlocking Shareholder Value, 1999, Mergers & Acquisitions: A Global Research Report.
• KPMG global report survey, a new dawn: good deals in challenging times, 2011.
• Krake, F., 2005, Succesful Brand management in SMEs: a new theory and practical hints, Journal of Product and Brands Management , vol.14, no. 4, p. 228-238.
• Lajoux, A.R., 2006, The art of M&A integration: a guide to merging resources, processes and responsibilities, 2nd Edition, McGraw-Hill, New York.
• Larsson, R., Finkelstein S., 1999, Integrating strategic, organizational, and human resource perspectives on mergers and acquisitions: a case survey of synergy realization, Organization Science vol.10, no.1, p. 1–26.
• Lewicki, R.J., McAllister, D.J., Bies, R.J., 1998 Trust and distrust: new relationships and realities, Academy of Management Review, vol. 23, no. 3, p.438–458.
• Marks, M.L., & Mirvis, P.H., 2001, Making mergers and acquisitions work: Strategic and psychological preparation. Academy of Management Executive, vol. 15, no.2, p. 80–92.
• Meglio, O., Risberg, A., 2010, Mergers and acquisitions, Time for a methodological rejuvenation of the field?, Scandinavian Journal of Management, vol. 26, no. 1, p. 87-95.
• Meglio, O., Risberg, A., 2012, Are Mergers and Acquisitions Treated as if they were alike? A review of empirical literature, Advances in Mergers and Acquisitions, volume 10, p. 1–18.
• Oberg, C., 2013, Network Imitation to Deal with Sociocultural Dilemmas in Acquisitions of Young , Innovative Firms, Thunderbird International Business Review vol. 55, No. 4, p. 387-403.
• Papadakis, V., 2007, Growth through mergers and acquisitions: How it won’t be a loser’s game, Business Strategy Series, vol. 8, no.1, p. 43-50.
• Puranam, P., Singh, H., Zollo, M., 2006, Organizing for innovation: Managing the coordination autonomy dilemma in technology acquisitions, Academy of Management Journal, vol. 49, no. 2, p.263–280.
• Puranam, P., Srikanth, K., 2007, What they know vs. what they do: how acquirers leverage technology acquisitions, Strategic Management Journal, Vol. 28, p.805–825.
• PwC Israel - 2015 Hi-Tech Exit Report, The PwC Israel report, Tel-Aviv Israel,
• Ranft, A.L., 1997, Preserving and transferring knowledge- based resources during post acquisition implementation. Doctoral dissertation, Kenan-Flager Business School, University of North Carolina.
• Ranft, A., 2006, Knowledge preservation and transfer during post-acquisition integration, in Cooper, C. and Finkelstein, S. [Eds.]: Advances in Mergers and Acquisitions, vol. 5, no. 6, p. 51-67, JAI, New -York.
• Ranft, A.L., Lord, M.D., 2002, Acquiring new technologies and capabilities: a grounded model of acquisition implementation, Organization Science vol. 13, no. 4, p. 420–441.
• Reynolds, N. S., Teerikangas, S., 2015, The international experience in domestic mergers – Are purely domestic M&A a myth?, International Business Review.
• Schweiger, D.M., Denisi, A.S., 1991, Communication with employees following a merger: a longitudinal field experiment, Academy of Management Journal, vol. 34, no. 1, p.110–135.
• Sorkin, A. R., 2009, In latest deal, Cisco buys Starent for $2.9 billion. Available from http://dealbook. blogs.nytimes.com.
• Stahl, G.K.,Voigt, A., 2005, Impact of cultural differences on merger and acquisitions performance: a critical research review and a negative model, Advances in merger and acquisitions, vol. 4, no. 4, p. 51-82.
• Steier, L., 2007, New venture creation and organization: a familial sub-narrative. Journal of business Research vol. 60, no. 10, p. 1099–107.
• Teece, D., 1998, Capturing Value from Knowledge Assets: The New Economy, Markets for Know-how, and Intangible Assets, California Management Review, vol. 40, no. 3, p. 55–79.
• Teerikangas, S., 2012, Dynamics of acquired firm pre acquisition employee reactions, Journal of Management, vol.38, no. 2, p. 599–639.
• Vaara, E., Monin, P., 2008, A recursive perspective on discursive legitimation and organiza tional action in mergers and acquisitions, Organization Science, January, p. 1-20.
• Walsh, J. P., 1989, Doing a deal: Merger and acquisition negotiations and their impact upon target company top management turnover, Strategic Management Journal. vol. 10, p. 307-322.
• Walsh, J. P., Kosnik, R. D., 1993, Corporate raiders and their disciplinary role in the market for corporate control, Academy of Management Journal, vol.36, no. 4, p. 671-699.
• Weber, Y., Tarba, Y.S., Rozan-Bachar, Z., 2011, Mergers and acquisitions performance paradox: the mediating role of integration approach, European Journal of international management, vol.5, no. 4, p. 373-393.
• Very, P., Lubatkin, M., Calori, R., Veiga, J., 1997, Relative standing and the performance of recently acquired European firms, Strategic Management Journal, vol. 18, no. 8, p. 593–614.
• Whitaker, S. C., 2012, Mergers & Acquisitions Integration Handbook: Helping Companies Realize the Full Value of Acquisitions, Hoboken: Wiley.
• Zaheer, A., McEvily, B., Perrone, V., 1998, Does trust matter? Exploring the effects of interorganizational and interpersonal trust on performance, Organization Science, vol. 9, no. 2, p. 141-159.
• Zollo, M., Meier, D., 2008, What is M&A performance? Academy of Management Perspectives, vol.22, no. 3, p. 55–77.
• Zollo, M., Singh. H., 2004, Deliberate learning in corporate acquisitions: Post-acquisition strategies and integration capability in U.S. bank mergers, Strategic Management Journal, vol. 25, no.13, p. 1233–1256.

Identifiers

DOI

10.18559/ebr.2016.1.6