Merger Motives and Merger Prescriptions

The article surveys theories of merger motives and relates them to prescriptions for merger strategies. The theories of merger motives can be classified into seven groups. Those theories arguing with private information, managerial empire‐building or process influences are better supported by evidence than those tracing mergers back to efficiency gains or monopoly power. The explanations of mergers in terms of raider activity or macroeconomic disturbances carry the least plausibility. Strategy authors have discussed mergers with respect to the choice of acquisition mode, entry mode, and integration mode. The prescriptions on all three topics are dominated by the efficiency theory of mergers. For this reason they are dangerous guides for participants in merger processes. On the other hand they provide an efficient language for communicating one's position. The research in merger motives should be redirected from the efficiency theory to explanations that build on decision processes, conflicting goals, and ambiguous private information.

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