Mergers and acquisitions and the dynamics of post-acquisition integration

Abstract

Prior research suggests that the majority of mergers and acquisitions (M&A) fail to deliver the value that motivated the transaction. In many M&A transactions that are motivated by synergy value a substantial amount of the potential value is lost during the post-acquisition integration phase. This paper reports the findings from in-depth fieldwork investigating how the post-acquisition integration process unfolds over time. Data was collected from semi-structured individual and focus interviews with 26 post-acquisition integration specialists; drawing on more than 200 merger integration experiences. The study identified four common patterns over time in post-acquisition integration outcomes ranging from highly successful over performance to downward spiralling under performance. Causal loop diagrams were used to structure and analyse the interview data to identify the causal relationships responsible for successful and unsuccessful post-acquisition integrations. The result was an integrated causal loop diagram of the feedback processes driving the four common dynamic patterns in outcome measures. The study identifies new constructs, Synergy fatigue and Creep, that play an important role in post-acquisition integration. The findings show that on-going managerial pressure to generate new synergies or accelerate synergy realisation can result in Synergy fatigue. This undermines commitment and engagement, and activates a host of reinforcing feedback processes that cause deterioration in work effort and Creep, the reversal of previously realised synergies. The effect is to damage revenue and cost synergy initiatives and negatively impact performance of the ongoing business.