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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Early work by strategy content scholars tended to focus on identifying factors that appeared to influence the profitability of M&As. The goal of this research was to identify what distinguishes good from bad acquisitions. Ansoff et al. (1971, p. 39) refered to such studies as the “correlates of success” stream. Correlates are myriad; the following are indicative of the stream’s scope:

  • Characteristics of the acquirer: For example, amount, nature, timing, and performance of past acquisitions (Fowler & Schmidt, 1988; Hayward, 1999; Kusewitt, 1985).
  • Characteristics of the candidate: For example, historical growth rate, market share, profitability, industry (Fowler & Schmidt, 1988; Kitching, 1967; Kusewitt, 1985; Rappaport, 1979; Rumelt, 1982; Salter & Weinhold, 1979).
  • Aspects of the relationship of the parties in the dyad: For example, degree of industry relatedness or type of acquisition (such as horizontal integration, vertical integration, or conglomerate) and relative size (Chatterjee, 1986; Kitching, 1967; Lubatkin, 1983, 1987; Paine & Power, 1984; Rumelt, 1982; Salter & Weinhold, 1979; Singh & Montgomery, 1987).
  • Nature of the deal: For example, timing, mode of payment (equity or cash), form (such as merger or tender offer) (Datta, Pinches & Narayana, 1992; Kusewitt, 1985; Rappaport, 1979; Schmidt & Fowler, 1990).

    • Some of the correlates, particularly the degree of industry relatedness, have proved difficult to measure, and their relationships to financial indicators of performance remain elusive (Datta et al., 1992; Rumelt, 1982). Work on them continues along traditional “correlates of success” lines. Various combinations of the correlates, however, can be used to help a firm set objectives for an M&A effor or to highlight potential problem areas, or they can be translated into criteria for screening and ranking sectors or candidates. Otherwise put, they constitute a large part of the content of strategy.