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

Appropriate valuations can be determined by using models and tools to discount cash flows or use other valuation techniques (Hubbard, 1990) and accomplish other analytical tasks. Optimal procedures to due diligence can be followed (Angwin, 2001; Hubbard, Lofstrom, & Tully, 1994,). The best payment methods, modes, and timing can be selected. In addition to choices involving substantive aspects of content, psychological, organisational, and other process impediments to rational decision-making can be identified and, at least in part, dealt with to minimise biases and distortions in choices and to create a positive climate for implementation (Haspeslagh & Jemison, 1991). Finally, while not always subject to managerial control, a number of variables of which management would contribute to smooth postacquisition integration has at least been identified (Soderberg & Vaara, 2003). And there are suggestions and prescriptions, some of which have empirical support, for how issues related to human capital can be better managed to achieve integration goals (Brousseau, Larsson, MacPhail, & Swaels, 2004; Larsson & Lubatkin, 2001).

Taken together, this literature is oriented towards improving performance by reducing failures associated with firms buying the wrong candidates, paying too much for them, or failing to realise the intended benefits by not recognising them when justifying the acquisition internally before it occurs, or mishandling integration after it occurs. By eliminating failures, the ratio of successful acquisitions to total acquisitions will increase and performance will improve.

Simply reducing failures, however, is limiting. Haspeslagh and Jemison (1991) implicitly recognised this by suggesting that companies that are successful in their acquisitions are quite different from those that are not. Rather than avoiding failure, the alternative view of performance improvement proposed in this book focuses on increasing successes by not missing out on potential opportunities.

1.2.4. An Alternative View of Performance Improvement

Beware of being unduly limited by the prevailing paradigm [in developing] models of strategic decision making.

—Pennings (1985)