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M&As: the need for speed?

written by Mark Thomas 15. May 2019
Change ManagementImplementation & Integration

It is one of the most fundamental questions for anyone managing change; how quickly to proceed. In essence, the central issue concerns whether fast decision-making leads to improved long-term performance of an organisation. It is hardly surprising then, that this relationship has become a key preoccupation to academics and practitioners. Mergers and acquisitions (M&As) deepen this question given the volume of change that is required and the need to choose the appropriate speed of change whilst the two organisations simultaneously try to manage normal day to day operations.

One traditional answer to this question has been the faster the better. This perhaps reflects a ‘common sense’ approach (Angwin, 2004). that speed of execution will always be positive. Many organisations such as General Electric and Cisco vaunt the merits of their 100-day M&A plans, ensuring that the major changes are driven through the acquired organisation within the first few months. This approach has been supported by researchers working in high-tech industries in the USA in particular (e.g. Graebner, Eisenhardt & Roundy, 2010; Inkpen et al. 2000 etc.). The use of practitioner “buzzwords” such as “the faster the better” or “time is money” (Bauer, Hautz & Matzler, 2015, p.19) or “just do it” have merely served to reinforce this idea.

However, rapid change during the post-merger integration (PMI) phase may also have negative effects. Ranft & Lord (2002) found that autonomy, status and commitment significantly affect employee retention in the PMI phase. Brutal changes in the aftermath of the merger signature may encourage employees to leave. In fact, within knowledge industries time may be required to discern exactly who are the key individuals. Rapid PMI may also negatively affect the social identity of employees (Homburg & Bucerius, 2006). Slower integration is thus more pertinent when the organization is more customer or service focused (e.g. the hospitality or health care industries). Here, time become a necessary factor to ensure that employees are sufficiently able to adapt to the new structure. This is vital is a “new, common future” (Olie, 1994, p.404) is to be built.

According to the biologist Stephen Jay Gould, dichotomisation “often leads to misleading or even dangerous oversimplifications” (p.30). This is certainly true in many discussions on the relative merits of speed of change during the PMI. Fortunately, multiple pieces of research by scholars such as Florian Bauer (e.g. Bauer, & Matzler, 2014; Bauer, King & Matzler, 2016; Uzelac et al., 2016) have demonstrated that companies are clearly not choosing a simplistic fast or slow approach as though there were just settings on a two-level speed dial.

In fact, the process is far more complex. Thus, a more nuanced, contingency view accepts that organisations working in different environments may have to accept one or the other in accordance with their industry. From their study of two merging European airlines, Monin et al. (2013) concluded that organisations might have to sacrifice short-term gains in cost, profit or efficiency to ensure the longer-term motivation and commitment of their employees. Other researchers have suggested that the speed of PMI should be speed of integration should be aligned of the value systems of the organization to ensure efficiency (Lin et al., 2018) or that speed may depend on the degree of complementarity of the two organisations (Bauer & Matzler, 2014) that are merging.

Finally, recently presented research (Thomas, Angwin & Thanos, 2018) indicates that managers may be confused or inconsistent in their approach to speed during PMI. Often, they advocate one set of temporal norms (i.e. fast PMI) whilst executing another set (a slower rate of change). Such inconsistencies may be due to managers feeling normative external pressures for rapid action whilst realising understanding that internal dynamics require a more tempered approach. This may explain variations in the speed of integration during PMI. In this context, it may be more appropriate to refer to speeds rather than speed of integration (Thomas, Angwin & Thanos, 2019). Understanding the complexity of speed(s) of change and the impact on the performance during the post-merger phase is thus crucial to our comprehension of why some M&As fail whilst others succeed.

References

Bauer, F., & Matzler, K. (2014). Antecedents of M&A success: The role of strategic complementarity, cultural fit, and degree and speed of integration. Strategic Management Journal, 35(2), 269-291. Bauer, F., King, D., & Matzler, K. (2016). Speed of acquisition integration: Separating the role of human and task integration. Scandinavian Journal of Management, 32(3), 150-165. Bauer, F., Hautz, J., & Matzler, K. (2015). Unveiling the myths of M&A integration: challenging general management and consulting practice. Journal of Business Strategy, 36(2), 16-24. Gould, S. J. (1997). Questioning the Millennium: A Rationalist’s Guide to a Precisely Arbitrary Countdown, Crown. Graebner, M. E., Eisenhardt, K. M., & Roundy, P. T. (2010). Success and failure in technology acquisitions: Lessons for buyers and sellers. Academy of management perspectives, 24(3), 73-92. Homburg, C., & Bucerius, M. (2006). Is speed of integration really a success factor of mergers and acquisitions? An analysis of the role of internal and external relatedness. Strategic management journal, 27(4), 347-367. Inkpen, A. C., Sundaram, A. K., & Rockwood, K. (2000). Cross-border acquisitions of US technology assets. California Management Review, 42(3), 50-71. Lin, Y., Shi, W., Prescott, J. E., & Yang, H. (2018). In the Eye of the Beholder: Top Managers’ Long-Term Orientation, Industry Context, and Decision-Making Processes. Journal of Management, 0149206318777589. Monin, P., Noorderhaven, N., Vaara, E., & Kroon, D. (2013). Giving sense to and making sense of justice in postmerger integration. Academy of Management Journal, 56(1), 256-284. Olie, R. (1994). Shades of culture and institutions-in international mergers. Organization studies, 15(3), 381-405. Ranft, A. L., & Lord, M. D. (2002). Acquiring new technologies and capabilities: A grounded model of acquisition implementation. Organization science, 13(4), 420-441. Thomas, M., Angwin, D., & Thanos, I. (2018). Is this a good time? The roles of chronos and kairos in the speed(s) of post-merger integration, EURAM 2018: Research in Action – Accelerating knowledge creation in management, SIG 13_01: The Strategic Practices of Mergers & Acquisitions, June 20-23, 2018, Reykjavik, Iceland Thomas, M., Angwin, D., & Thanos, I. (2019). Mapping the speed variations of the post-merger change management process through critical incident methodology, EURAM 2019: Exploring the Future of Management – Facts, Fashion & Fad, ST13_04 – Mergers & Acquisitions and Divestitures: A Glimpse into the Future, June 26-29, 2019, Lisbon, Portugal Uzelac, B., Bauer, F., Matzler, K., & Waschak, M. (2016). The moderating effects of decision-making preferences on M&A integration speed and performance. The International Journal of Human Resource Management, 27(20), 2436-2460.


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