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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Substantial academic research, in a wide range of disciplines, has been undertaken to identify reasons for poor performance and to provide the basis for advancing prescriptions for avoiding failure. Strategic management and organisational behaviour scholars have made a number of contributions to performance improvement including the following approaches:

  • Providing conceptual frameworks, norms, and analytical tools to evaluate candidates and improve choice so that the right ones are selected, to arrive at appropriate valuations, and to negotiate winning offering packages.
  • Identifying and suggesting how to avoid the cognitive and other psychological, social, and organisational influences and constraints that can systematically introduce biases and distortions into rational decision-making processes.
  • Improving the understanding of various substantive aspects of the acquisition process such as the way a strategic rationale for an M&A effort is developed, how it can be translated into criteria for evaluating candidates and how different approaches to postacquisition integration are appropriate under different conditions.

    • Together, these approaches, referred to as the traditional view in this study, are largely oriented towards improving performance by reducing failure.

    In this book, the view is taken that performance improvement can also be achieved by increasing the number of successful acquisitions that occur. The complementary nature of these views can be readily translated into arithmetic terms. If failures are the numerator in a fraction and total acquisitions the denominator, the traditional view seeks to reduce the numerator; the alternative view seeks to increase the denominator. Put in statistical hypothesis testing terms, buying the wrong candidate might be likened to a type 2 error when a false hypothesis is accepted; forgoing an opportunity to a type 1 effort when a true hypothesis is rejected (Butler, 1998).