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

A candidate may be put on hold. It may be attractive but not at the current price or under the existing legislative regime or until some other change takes place either internally in the candidate or externally in its environment. There are occasions, however, when companies evaluate a candidate, find it attractive, but do not negotiate with, bid for, or otherwise pursue it. Nor do they necessarily plan to pursue the candidate pending the outcome of a specific change in the environment or in the candidate itself.

In the context of a discussion of organisational decision-making, March and Olsen (1976, p. 10) observed, “Organisations often…do nothing to implement a decision after having devoted much time, energy and enthusiasm to making it”. More particularly, Haspeslagh and Jemison (1991, p. 51) maintain that during the acquisition process “a commitment may stall, reverse or accelerate”.

The alternative view of performance improvement advanced in this book focuses on these apparently missed opportunities. It implies that the causal factors for decision reversals and the do-nothing phenomenon may be manageable and that their impact on decisions with potentially positive outcomes can be reduced. It holds that if there were a reduction in their impact, fewer attractive opportunities would be missed, and acquisition performance would be improved. This view assumes, for reasons described in the following text, that the missed opportunities would, indeed, be attractive, that is, the acquisitions would predominantly consist of successes rather than failures; and, that missed opportunities are frequent enough to have a noticeable impact on performance. Finally, it assumes that missed opportunities are sufficiently costly to warrant attention, a point noted in this chapter but developed in more detail in chapter 5.

1.2.4.2. Acquiring “Attractive” Candidates Will Improve Performance

While opinions about the attractiveness of a candidate may be held by individual participants in the decision-making process in the earliest phases of an acquisition effort, the development of a formal view of attractiveness typically follows the preparation of an explicit acquisition justification in the form of a memorandum (Haspeslagh & Jemison, 1991) by the organisational unit tasked with its compilation.