Chapter

Creating Value Through Mergers and Acquisitions

Michael A. Hitt, David King, Hema Krishnan, Marianna Makri, Mario Schijven, Katsuhiko Shimizu and Hong Zhu

in The Handbook of Mergers and Acquisitions

Published in print June 2012 | ISBN: 9780199601462
Published online September 2012 | e-ISBN: 9780191743320 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199601462.003.0004
Creating Value Through Mergers and Acquisitions

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Mergers and acquisitions have been a popular strategy, but the research suggests that acquiring firms create little or no value. Reasons for these outcomes include an inability to create synergy, paying too high a premium, selecting inappropriate targets, and ineffective integration processes, among others. However, careful selection of targets and effectively implemented acquisitions can achieve synergy and create value. For example, targets selected that have capabilities complementary to those held by the acquiring firm provide the greatest opportunity for synergy creation. Acquisitions that provide new knowledge to the acquiring firm that can be used to enhance its competitive position often create value. For example, the knowledge gained from acquisitions can enhance innovation when the target firm has complementary science and technology to that held in the acquiring firm. In addition, cross-border acquisitions present significant opportunities, but they also provide more complex challenges for achieving synergy and creating value. Finally, research shows that executives frequently have trouble admitting failure and divesting acquisitions.

Keywords: value creation; synergy; complementary capabilities; acquisition premiums; cross-border acquisitions

Chapter.  19579 words. 

Subjects: Financial Institutions and Services

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