Why Companies Do Not Pursue Attractive Mergers and Acquisitions
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Why Companies Do Not Pursue Attractive Mergers and Acquisitions ...

Chapter 1:  Introduction
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The boundaries of the streams (and substreams) in acquisition decision-making, and more generally, strategic decision-making, are blurred (Papadakis & Barwise, 1998). Similar issues are dealt with by different (sub)streams at different levels of abstraction or specificity and with different perspectives. Although subject areas addressed overlap both between and within the streams, several more or less distinct ones are identifiable on the basis of their contributions to M&A (and strategic decision-making) performance improvement. Examples of their contributions, those of prior research on which they build and the most fundamental assumptions on which they are based are noted next:

  • Rational acquisition planning: In this stream, the acquisition process is often deconstructed into phases, each of which consists of a collection of discrete activities and decisions, starting with the setting of objectives for an M&A effort and typically ending with negotiations or completion of the deal. Much of the rational acquisition-planning stream is normative. Its traditional focus has been on improving the evaluation and selection of acquisition candidates (Pablo et al., 1996) and, overlapping with a corporate finance stream, arriving at appropriate valuation decisions (Rappaport, 1979; Salter & Weinhold, 1978, 1979). Two fundamental assumptions underlie most of this work. First, the acquisition decision-making process is (or, in the case of normative literature, should be) logical and rational. Second, if the analytical tasks and the important decisions they support are based on the use of the right approaches, tools, and techniques, failure will be avoided and performance improved (Ansoff et al., 1971). Paradigmatically, this stream is similar to the strategic management content tradition. Its contributions to the process tradition include its maps of the decision-making process and descriptions of their limitations such as that shown in figure 1.3.
  • Behavioural impediments to rational acquisition planning: Behavioural decision theorists (BDT), drawing heavily on research from cognitive psychology, seek to identify and describe decision-makers’ cognitive limitations, motivations, and other psychological factors, which tend to bias or corrupt, in a systematic and predictable way, the analytical mode of decision-making assumed in the rational acquisition planning model.
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