Synergies and Post-Acquisition Performance: Differences versus Similarities in Resource Allocations

Theory suggests that synergy is an essential ingredientfor value creation to occur as a result of acquisitions. This dominant theory often argues for similarities among resources in the acquiring and targetfirms. However; it is argued here that uniquely valuable synergy might be created where differences (versus similarities) exist between resources in the acquiring and target firms. Tests of these competing hypotheses confirmed that differences contributed significantly to performance in the mergedfirm. Thisfinding may suggest that traditional distinctions between related and unrelated mergers may not be as useful as once thought. A focus on specific resources rather than strategy types in the merger and acquisition research may better explain firm performance.

[1]  Richard S. Ruback,et al.  The Market for Corporate Control: The Scientific Evidence , 2002 .

[2]  Robert E. Hoskisson,et al.  Effects Of Acquisitions on R&D Inputs and Outputs , 1991 .

[3]  Sayan Chatterjee,et al.  Excess Resources, Utilization Costs, And Mode Of Entry , 1990 .

[4]  Gregory G. Dess,et al.  Industry Effects and Strategic Management Research , 1990 .

[5]  Paul Zarowin,et al.  The mode of corporate diversification: Internal ventures versus acquisitions , 1989 .

[6]  A. Auerbach,et al.  Corporate Takeovers: Causes and Consequences. , 1989 .

[7]  R. Grant.  On 'Dominant Logic', Relatedness and the Link between Diversity and Performance , 1988 .

[8]  C. Hill,et al.  Internal Capital Market Controls and Financial Performance in Multidivisional Firms , 1988 .

[9]  Nikhil P. Varaiya.  The ‘winner's curse’ hypothesis and corporate takeovers , 1988 .

[10]  Jay B. Barney,et al.  Returns to bidding firms in mergers and acquisitions: Reconsidering the relatedness hypothesis , 1988 .

[11]  Gareth R. Jones,et al.  Transaction cost analysis of strategy‐structure choice , 1988 .

[12]  A. Cooper,et al.  Established companies diversifying into young industries: A comparison of firms with different levels of performance , 1988 .

[13]  H. Varian.  Symposium on Takeovers , 1988 .

[14]  M. C. Jensen.  Takeovers: Their Causes and Consequences , 1988 .

[15]  Michael Lubatkin,et al.  Merger Strategies and Capital Market Risk , 1987 .

[16]  P. Rajan Varadarajan,et al.  Diversification and Measures of Performance: Additional Empirical Evidence , 1987 .

[17]  Cynthia A. Montgomery,et al.  Corporate acquisition strategies and economic performance , 1987 .

[18]  A. Diamantopoulos,et al.  Uncertainty and synergy: Towards a formal model of corporate strategy , 1987 .

[19]  John W. Slocum,et al.  Managing corporate culture through reward systems , 1987 .

[20]  C. Prahalad,et al.  The dominant logic: A new linkage between diversity and performance , 1986 .

[21]  J. Barney.  Strategic Factor Markets: Expectations, Luck, and Business Strategy , 1986 .

[22]  R. Duane Ireland,et al.  RELATIONSHIPS AMONG CORPORATE LEVEL DISTINCTIVE COMPETENCIES, DIVERSIFICATION STRATEGY, CORPORATE STRUCTURE AND PERFORMANCE , 1986 .

[23]  Philip Bromiley,et al.  Corporate Capital Investment: A Behavioral Approach , 1986 .

[24]  Sayan Chatterjee,et al.  Types of Synergy and Economic Value: The Impact of Acquisitions on Merging and Rival Firms , 1986 .

[25]  Cynthia A. Montgomery,et al.  Product-Market Diversification and Market Power , 1985 .

[26]  Bruce T. Lamont,et al.  Mode of Corporate Diversification and Economic Performance , 1985 .

[27]  James M. MacDonald,et al.  R and D and the Directions of Diversification , 1985 .

[28]  M. Hitt,et al.  Corporate distinctive competence, strategy, industry and performance , 1985 .

[29]  V. Mahajan,et al.  Risk/Return Performance of Diversified Firms , 1985 .

[30]  J. B. Kusewitt.  An exploratory study of strategic acquisition factors relating to performance , 1985 .

[31]  H. Grabowski,et al.  Organizational capital and the choice between specialization and diversification , 1985 .

[32]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[33]  Robert S. Harris,et al.  The Role of Market Structure in Merger Behavior , 1984 .

[34]  M. Lubatkin.  Mergers and the Performance of the Acquiring Firm. , 1983 .

[35]  Michael Bradley,et al.  THE RATIONALE BEHIND INTERFIRM TENDER OFFERS Information or Synergy , 1983 .

[36]  B. Eckbo,et al.  Horizontal Mergers, Collusion, and Stockholder Wealth , 1983 .

[37]  A. Lemelin,et al.  Relatedness in the Patterns of Interindustry Diversification , 1982 .

[38]  R. Rumelt,et al.  Diversification strategy and profitability , 1982 .

[39]  William Herman Newman,et al.  WHAT THE CORPORATION SHOULD PROVIDE ITS BUSINESS UNITS , 1982 .

[40]  Gregory G. Dess,et al.  Corporate-Level Strategy, Business-Level Strategy, and Firm Performance , 1981 .

[41]  G. Meeks,et al.  PROFITABILITY MEASURES AS INDICATORS OF POST-MERGER EFFICIENCY: REPLY , 1981 .

[42]  M. Allen,et al.  THE KEY TO SUCCESSFUL ACQUISITIONS , 1981 .

[43]  Benjamin Tregoe,et al.  Top management strategy , 1980 .

[44]  D. Teece.  ECONOMIES OF SCOPE AND THE SCOPE OF THE ENTERPRISE , 1980 .

[45]  John J. Clark,et al.  Merger Types and Shareholder Returns: Additional Evidence , 1980 .

[46]  Malcolm S. Salter,et al.  Diversification Through Acquisition: Strategies for Creating Economic Value , 1979 .

[47]  O. Williamson,et al.  Markets and Hierarchies: Analysis and Antitrust Implications. , 1977 .

[48]  E. Fama.  EFFICIENT CAPITAL MARKETS: A REVIEW OF THEORY AND EMPIRICAL WORK* , 1970 .

[49]  G. Donaldson,et al.  Corporate Debt Capacity. , 1962 .

[50]  R. Duane Ireland,et al.  MERGERS AND ACQUISITIONS AND MANAGERIAL COMMITMENT TO INNOVATION IN M-FORM FIRMS , 1990 .

[51]  M. Porter.  From Competitive Advantage to Corporate Strategy , 1989 .

[52]  Frederic M. Scherer,et al.  Mergers, sell-offs, and economic efficiency , 1987 .

[53]  Michael Lubatkin,et al.  Merger strategies and stockholder value , 1987 .

[54]  Robert Jacobson,et al.  The Validity of ROI as a Measure of Business Performance , 1987 .

[55]  R. Roll,et al.  The Hubris Hypothesis of Corporate Takeovers , 1986 .

[56]  Jay R. Galbraith,et al.  Strategy implementation : structure, systems, and process , 1986 .

[57]  M. Porter.  Competitive Advantage: Creating and Sustaining Superior Performance , 1985 .

[58]  G. Benston.  The Validity of Studies with Line of Business Data: Reply [The Validity of Profits-Structure Studies with Particular Reference to the FTC's Line of Business Data] , 1985 .

[59]  D. Ravenscraft,et al.  The Misuse of Accounting Rates of Return: Comment , 1984 .

[60]  John J. McGowan,et al.  On the Misuse of Accounting Rates of Return to Infer Monopoly Profits , 1983 .

[61]  R. Biggadike.  The Risky Business of Diversification , 1979 .

[62]  H. Ansoff.  Corporate strategy : an analytic approach to business policy for growth and expansion , 1965 .

[63]  Merton H. Miller.  The Cost of Capital, Corporation Finance and the Theory of Investment , 1958 .