Mergers and acquisitions research:Time for a theory rejuvenation of the field

Introduction

Introduction Mergers and acquisitions (M&A) are a very persistent global phenomenon, dating back centuries, and extending across most countries of the world. They have experienced an unprecedented increase over the last decades by volume and value, with total number of deals in 2021 standing at 57,948 with a value of $5.2 trillion. 1 Since the year 2000, 790,000 deals have been announced amounting to $57 trillion in value. Despite the prominence of the phenomenon, many M&A reportedly fail, or display ailing performance (Bauer and Matzler, 2014; Dyer et al., 2004). Even after nearly one hundred years of research into M&A, these high failure rates across sectors remain poorly understood (Graebner et al., 2017) and are “a puzzle for academics and practitioners” (Capasso and Meglio, 2005: 219). We argue that it is time for a rejuvenation of theory in M&A research. Heeding the advice that “M&A research remains confined within established boundaries and leaves new, potentially important insights understudied” (Bauer et al., 2018: 3), we originally proposed a Special Issue as a way of 1) promoting a necessary dialogue between theoretical traditions, 2) studying M&A in varied sectors and different contexts, and 3) taking advantage of methodological advances to develop theory about M&A. The large number of submissions received for the Special Issue broadened further our perspective. In this editorial, we offer ideas for scholars to theoretically rejuvenate the field of M&A research by delving into existing and novel conceptual relationships alongside a broad research toolkit. We introduce the Special Issue and its contributions and identify five interrelated domains for making progress in research on M&A: critical analysis, theoretical crossfertilisation, conceptual innovation, philosophical reflection, and methodological diversity. We argue for a willingness to challenge the status quo, think creatively, and embrace uncertainty in developing M&A theory and in rejuvenating the field of study.

This Special Issue

We formed a team of Special Issue Guest Editors with different areas of expertise that complement each other in terms of research topics and methodologies. This allowed us to be receptive to different types of submissions united around the topic of M&A. Openness to variety is reflected in the eight articles that were selected for inclusion in the Special Issue. These cover topics related to pre-acquisition conditions, post-acquisition integration and value creation in different forms of M&A, and make use of a range of quantitative and qualitative methodologies. All contributions in the Special Issue help develop theories and theorizing on M&A. Two papers focus upon pre-acquisition enabling and constraining conditions. Ahsan et al. (2023) examine cross-border acquisitions in emerging markets. They study a large sample of firms over a ten-year period and focus on board interlocks as an important enabling factor when supporting institutions that are either weak or missing. This contributes to our understanding of the pre-deal phase and addresses the special issue call for focus upon studying M&A in different contexts. Zhou et al. (2023), in turn, focus on a different set of pre-acquisition conditions by researching the relationship between pre-acquisition alliances and post-acquisition performance. Their study of over 700 acquisitions shows how post-acquisition performance is influenced by the acquiring firm’s familiarity with the alliance partner’s context, particularly in terms of the distinction between contractual based knowledge and relational learning.

Three contributions in the Special Issue engage directly with questions pertaining to integration in the post-merger or post-acquisition stage. Thomas et al. (2023) take a new look at speed of integration, challenging the widely held assumption that post-merger integration proceeds at a linear, constant rate. Through a longitudinal study of two organizations, they demonstrate changes in speed during the integration process, and discuss their findings theoretically using the temporal concepts of “chronos” and “kairos.” Stensaker et al. (2023) focus their analysis on the novel, but seldomly studied issue of the dynamics of unionmanagement collaboration in corporate mergers. Comparing two integration processes in different units of a merging company, these authors offer a theoretical understanding of how and why one process was characterized by a virtuous cycle of trust and constructive collaboration that facilitated integration and the other turned into a vicious cycle of mistrust and conflict, causing disruption, and impeding integration. Steigenberger and Ebers (2023) study 199 integration teams in 23 absorption acquisitions and use qualitative comparative analysis (QCA) to unravel new knowledge on the conditions that motivate and enable such teams to attain the goals of the post-acquisition integration process. They offer a configurational account at the task-level of the integration process in M&A. They highlight the significance of integration teams as rarely studied actors, and how their teams are staffed, as important to integration outcomes. Three contributions in the Special Issue engage with value, all in the context of acquisitions. Sakhartov and Reuer (2023) present resource redeployment as a source of value creation in these initiatives. Their study uses a formal model to develop a theory of resource redeployment that both embraces and contrasts horizontal and non-horizontal acquisitions. Clougherty and Duso (2023), in turn, focus on the impact of relatedness on acquiring and rival firm value. Their analytical approach broadens the conception of M&A performance outcomes to take into account how merger relatedness can impact both acquiring and rival firms. Finally, in a markedly different and critical take on the concept of value in acquisitions, Meglio and Schriber (2023) offer a problematizing review of how it is discussed in existing research. They firmly argue for a rejuvenation of the notion of value in studies of acquisition performance by calling for the inclusion of that they call marginalized and neglected values. These offer new food for thought for M&A studies interested in value creation and performance.

Interrelated domains for making progress in M&A research

The eight contributions published in this Special Issue lead us to suggest avenues to further develop M&A research. This is by no means an exclusive or exhaustive list but intended as a basis for further debate. Critical Analysis. We start by calling for a critical assessment of existing theoretical frameworks within the field. In this way, scholars can identify strengths and limitations of existing theories, and areas where they might be outdated or inadequate. For example, in this special issue Clougherty and Duso (2023) revisit the longstanding relatedness hypothesis. The core logic driving this hypothesis suggests that the assets and skills in one business can be more effectively utilized in related businesses. On the other hand, diversification into unrelated businesses offers minimal opportunities for synergies to be achieved between the protagonists. In their study, Clougherty and Duso (2023) approach the relatedness concept from a different perspective. They argue that researchers move beyond a basic juxtaposition of related and unrelated acquirers to grasp the broader impact of merger relatedness. By widening their frame of attention away from a purely dyadic conception of M&A, they are able to consider the impact merger relatedness has upon rival firms. This reveals new insights about the relative value achieved in a deal by an acquirer. By revisiting the core concept of relatedness, the authors provide new insight into this existing framework. As another example, Thomas et al. (2023) argue that one of the most important decisions affecting the outcome of post-merger integration processes is the speed of integration. However, even with an expanding body of research on this topic, definitive conclusions continue to elude researchers on the effects of integration speed. While this discourse has been primarily characterized by starkly contrasting perspectives advocating either rapid or gradual post-merger integration, one point of agreement within this dialogue is the shared belief that integration follows a consistent, linear, and unvarying pace, regardless of its speed. The authors contest this assumption and draw on the Greek concepts of “chronos” and “kairos” to distinguish measurable objective clock time and experiential, subjective lived time. By taking a critical view and unpacking the concept of speed, Thomas et al. (2023) show that a more nuanced and non-linear understanding of temporality can reveal important insights about when and how post-acquisition changes occur, and how these may influence integration outcomes.

Revisiting existing data and reinterpreting research findings from new theoretical perspectives offers another avenue for potential critical analyses of M&A processes. These can lead to updating of assumptions and uncover hidden patterns and insights that were previously overlooked. Building on empirical data they collected between 2008 and 2010, Stensaker et al. (2023) provide insights into unfolding union-management collaboration during post-merger integration. Their research question was based on the empirical observation of two unionmanagement dynamics during the integration of two oil and gas companies. The first pattern was marked by a growing sense of trust and cooperation, which greatly aided the integration process. Conversely, the second pattern devolved into a harmful cycle of distrust and conflict, leading to disruptions, and hindering the integration efforts. It became evident that the evolving model of collaboration between the unions and management played a crucial role in comprehending the progression of post-merger integration.

Theoretical cross-fertilisation. Dialogues between multiple existing theories can create a more comprehensive and holistic framework for better understanding M&A processes and outcomes. Hereby scholars can bridge gaps which lead to a deeper understanding of complex and multifaceted phenomena such as mergers and acquisitions. Hence, we call for the integration of knowledge from varied research areas to address theoretical conundrums in M&A research. As an example, Steinbach et al. (2019) integrate construal level theory into upper echelons research that enable them to develop new theory on why most executives struggle with making effective decisions in different phases of the M&A process. In this special issue, Sakhartov and Reuer (2023) reconcile two previously separate lines of research. One focuses on how a single firm reallocates resources among its various product markets, while the other centers on how a corporate acquirer reallocates resources between its own business and the target company's business, both of which operate within the same industry. Sakhartov and Reuer (2023) use formal modeling techniques to develop a theory of resource redeployment between merging firms. As another example, to further enhance our understanding of when integration teams achieve superior performance in absorption acquisitions, Steigenberger and Ebers (2023) apply goal-setting theory. They use fuzzy-set comparative analyses of a large number of integration teams to offer more fine-grained empirical evidence at the task-level of the integration process. Goal-setting theory allows them to develop new interesting insights on the influence of goal ambition on M&A integration progress. Finally, Zhou et al. (2023) aim to reconcile different perspectives in explaining the relationship between pre-acquisition alliances and postacquisition performance. By doing so, the authors bridge the alliance and M&A literatures.

Conceptual Innovation. Introducing new concepts, terminologies, or models that challenge conventional thinking can offer fresh perspectives and stimulate novel discussions on M&A. Meglio and Schriber (2023) take on the task of unpacking and broadening the concept of value in M&A research. Building on the notion that value is in the eye of the shareholders as well as stakeholders, the authors pin point specific connotations of value that help to unpack the multidimensionality and intricacies of value in M&A. They advocate for a substantial reconceptualization of the notion of value, going beyond the strong shareholder orientation that remains dominant in the field. Others embrace conceptual innovation to delve into long-lasting issues that remains poorly understood, such as temporal dynamics in M&A. For example, Thomas et al. (2023) present a novel empirical illustration of shifts in speed within the postmerger integration process. This finding is substantiated by a theoretical exploration that employs temporal concepts of “chronos” and “kairos.” The authors further delve into the factors and mechanisms underlying these speed fluctuations, exploring both the reasons behind their occurrence and the methods by which they are manifest. They term this phenomenon the “kairotic switch.” Two contributions offer insights into the roles of specific sets of actors that have received little attention so far. Steigenberger and Ebers (2023) introduce the concept of “integration team staffing” into the field of post-merger integration, highlighting the significant influence of the composition of the integration team on integration outcomes. Ahsan et al. (2023) offer a detailed exploration of temporal aspects in M&A by distinguishing between the frequency and pace of cross-border acquisitions and investigating how “board interlocks” can influence both aspects during the pre-deal phase. The authors explore the limits to the efficiency of board interlocks in cross-border acquisition decisions by identifying moderating conditions and opening new avenues for research and theorizing. Their study also provides a useful reminder that emerging markets offer fertile settings for engaging with institutional theory, since institutional factors affect strategic decision-making and capability learning associated with cross-border M&A (Li et al., 2022)

Philosophical reflection. Engaging in philosophical discussions about the nature of the field, its objectives, and its relationship to broader concepts can lead to fresh insights and new directions. For example, Meglio and Schriber (2023) reflect on the construct of value in the M&A literature. They argue that an explicit emphasis on economic value and the implicit neglect of other values demonstrate an instrumental perspective that reinstates economic value as the paramount, nearly exclusive objective in acquisitions (Meglio and Risberg, 2011), effectively overshadowing other values. This is likely a limitation in studies of many acquisitions, but it becomes especially noteworthy in transactions involving non-profit or public organizations, such as hospitals, universities, or municipalities. In these cases, the advantages of the merger or acquisition are often challenging to quantify solely in terms of shareholder value. By emphasizing the necessity of precisely defining the meaning of value in both theoretical and empirical research, Meglio and Schriber (2023) illuminate previously inconsistent research findings. Methodological diversity. Theory advances go hand-in-hand with broadening the methodological toolkit both in terms of borrowing methods from other field as well as improving upon current methods. In this Special Issue, Sakhartov and Reuer (2023) offer an instructive example of the use of a formal model to develop theory by conciliating two hereto disconnected, but directly relevant, lines of research about resource redeployment. Steigenberger and Ebers (2023), in turn, show the pertinence of QCA techniques to unpack micro-level of aspects of the post-acquisition integration. Specifically, QCA revealed configurations of performance drivers of post-acquisition integration.

Conlusion

As we noted at the outset of this Special Issue, despite high failure rates, organizations and managers across sectors (e.g., commercial, not-for-profit, and public) continue to commit significant resources to M&A, often in response to, or anticipation of, contextual changes. Even after a century of research, the M&A phenomenon is still poorly understood and remains a puzzle to be solved (Capasso and Meglio, 2005). In order to achieve a better understanding of the phenomenon, this Special Issue is crafted to ‘widen our horizons and reveal new richness in M&A’ (Angwin, 2007). The submissions to the Special Issue provide novel insights into the processes and outcomes of M&A activity. They demonstrate M&A scholars’ willingness to challenge the status quo, think creatively, and embrace uncertainty. With this editorial we wish to encourage M&A scholars to further challenge the boundaries of existing research and apply or develop “novel” concepts and perspectives in addressing a variety of theoretical conundrums. We strongly believe that openness to different theoretical and methodological traditions is necessary to make inroads into developing generative knowledge about M&A activity across distinctive industry settings. Within the Special Issue, Stensaker et al. (2023) begin to address the “dark side” of M&A requested for in the call for papers. Specifically they recognize that pre-acquisition relationships, in this case negative ones between union and management, can resurface to hinder integration processes. This shows the dark side of M&A, in historical conflicts, can make ‘even the most carefully designed collaborative process become fragile.’ The “dark side” of M&A remains an important area for research as, despite their high failure rates, strategic management studies are yet to provide generative theory about the detrimental aspects that undercut M&A. Broadly speaking, the dark side manifests through, for example, conflict, opportunism, and unethical practices (Abosag, Yen & Barnes, 2016; Oliveira & Lumineau, 2019). We believe that further knowledge about the dark side of M&A would extend and compliment current research. Such endeavors are best achieved by drawing on theoretical and methodological perspectives from organization theory, sociology, and psychology (see e.g., Brown and Treviño, 2006; Vaughan, 1999; Zyglidopoulos, Hirsch, Martin de Holan & Phillips, 2017). It might also be useful to consider potential impacts of geopolitical tensions which may render certain cross-border M&A decisions more or less efficacious while influencing decisionmaking around future M&A plans. In the submissions received for the Special Issue we missed novel applications of mixed methods research. These studies typically combine quantitative data and qualitative materials in various ways to provide holistic understandings of the complexities involved in M&A, where quantitative data may allow generalisability of results and qualitative data may provide rich detailed explanation (see e.g., Angwin and Meadows, 2009; 2015; Kroon and Rouzies 2015). There are permutations of mixed and multi-methods research yet to be explored in the M&A literature. Multi-method designs can enable a more complete and accurate understanding of organizations, which are multi-dimensional and complex, as no single research method can accommodate all aspects of organizations (Wellman et al., 2023). Mixed methods research can lead to more nuanced theoretical models and theorizing that integrate financial, strategic, sociocultural, and human factors in M&A (Angwin et al., 2022; Aguinis, Werner, Lanza Abbott, Angert, Park and Kohlhausen, 2010) and hence further contribute to the theory rejuvenation of M&A research advocated in this Special Issue. Finally, we also missed submissions tackling the question of sustainability in M&A. By definition, M&A are motivated by the desire to grow, acquire new resources, develop synergies or enter new markets (Bauer and Matzler, 2014; Haleblian et al., 2009). These motivations are somewhat remote from sustainability issues and with rare exceptions (Feldman & Hernandez, 2022; Meglio & Park, 2019; Meglio & Schriber, 2023) the literature on M&A is still very much marked by the exclusive consideration of the interests of the shareholder vis-à-vis the interests of other stakeholders or vis-à-vis the society at large (Bettinazzi & Feldman, 2021). Similarly, the inclusion of sustainability considerations is still at an emerging stage in the M&A literature (Reynolds & Hasset, 2021) and future contributions could question the environmental and societal challenges posed by M&A activity.