Chapter 6: Mergers and Acquisitions: Strategic and Organizational Fit
6. Mergers and acquisitions: strategic and organizational ﬁt? INTRODUCTION This chapter examines what happens to ﬁrms emerging out of a merger or acquisition (M&A). We claim that the match between merging ﬁrms, together with their prior acquisitive growth history, are crucial for the fate of the newly created organization. Organizational founding is typically associated with entrepreneurs, but many ﬁrms arise out of existing ﬁrms through spin-oﬀs or M&As. What sets the former classes apart from M&A is inheritance: the skills that endow an M&A-based ﬁrm originate from the parents, while de novo ﬁrms have to build capabilities from scratch. Whether new ﬁrms formed by the fusion of two existing ﬁrms beneﬁt from previously acquired assets hinges partly on the combination and commingling of previously separate bundles of resources. The question that we should ask is: Under what conditions will the combining of such bundles yield distinct beneﬁts for the new ﬁrm? When exploring the fusion of two ﬁrms, we should consider a couple of distinct aspects that researchers have addressed. During the 1980s and 1990s much of the concern has been with the degree to which diversiﬁcation and relatedness prevailed ex ante. Mergers were viewed as an event which could aﬀect the abnormal returns of the constituting ﬁrms, depending on whether they belonged to similar or diﬀerent sectors, for example two, three or four-digit SIC sectors. The greater the relatedness as inferred by the similarity of sectors, the more the...
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