Signaling strategic commitment for organizational transition: how to manage potential M&As through voluntary disclosures

To ‘transit or not’ often depends upon winning over investor opinion to large strategic initiatives. M&A is one such major realignment of an organization and yet once a bid for a company has been announced there is a period of uncertainty when the bid may not be completed. This depends on share price movements determined more by investor perceptions than fundamental values. This paper investigates whether these perceptions may be influenced by ‘voluntary’ corporate communications and so link managerial practices to strategic outcomes. Drawing upon two very large M&A data sets (USA and UK) (57,000 deals; 30,000 communications) we argue managerial practice (signaling strategic commitment) shapes market response and demonstrate communication characteristics, and the use of high-reputation intermediaries, play an important role in determining share price reaction

Why good things don’t happen:the micro-foundations of routines in the M&A process

Why do organizations reject favorable opportunities - why don't good things happen? To address this question, we examine companies that fail to proceed with major opportunities for strategic renewal. By focusing upon routines in 28 cases of reverse mergers and acquisitions decisions across three continents, the research uncovers the centrality of a hitherto overlooked process, the authorization routine. The characteristics of this routine, and its nested nature, are shown to be critical to whether favorable opportunities are progressed. These findings contribute to the mergers and acquisition literature by extending prior process models and to the routines literature by showing how links and interactions between different layers of routines, and the nature of the routine enactment itself, are important in affecting strategic outcomes

Motive Archetypes in Mergers and Acquisitions (M&A): The Implications of a Configurational Approach to Performance

Why do managers continue to transact merger & acquisition (M&A) deals, in massive number and dollar terms, when so many are deemed to fail? This paradox is central to the study of M&A. Despite considerable research effort being devoted to refining and redefining assessments of M&A performance the consensus of opinion remains that most M&A fail. Certain of the high percentage of M&A failure, performance academics infer that the continued massive levels of transactions can only be explained as misguided actions by managers. This chapter believes that the performance paradox can begin to unravel if we move beyond simple inference of managerial intentions and observe what actually takes place in practice. For instance the underlying assumptions of performance academics, that; 1) each M&A must create greater value for acquiring shareholders; 2) no other reasons for an M&A are legitimate, are not adequate for capturing ‘legitimate’ managerial action in practice. This suggests that part of the reason for so many M&A appearing to be failures is a result of the ‘myopia’ of performance studies themselves, where assumed and simplified motives have resulted in crude categorisations and confounded data. These limitations in the M&A performance literature are addressed in this chapter by; 1) demonstrating a broader set of motivations for M&A; 2) establishing their legitimacy; 3) showing that motivations may not be singular in nature but intertwined and complex; 4) presenting a way in which this greater complexity may be conceived in order for more sensitive empirical tests to be performed

Strategic Practice during a hostile takeover process: the bid for Blue Circle PLC

This Blue Circle case gives a rare inside view into the strategic practice of target top management responding to a hostile bid. It allows for informed discussion around the strategic reasons for such a bid, the choice of defence strategies open to the target firm and the issues and tensions facing the target firm’s top manager as the bid evolves. The case traces the manoeuvrings of the target firm top management and illustrates how their actions and practices, across a wide range of issues and contexts, can influence strategic outcome. As such this case illustrates that strategic manoeuvrings can materially affect outcome. The focus of the case upon the target top manager also raises questions around whether he was acting in i) his own self-interest, ii) the interests of Blue Circle’s shareholders iii) the best interests of the firm. These questions are core to agency and stewardship perspectives on top management motivation. As the hostile bid process unfolds, and the activities and actions of the target CEO are revealed, answering these questions allows debate on whether the target CEO is agent, agency problem or steward

Lost but found: bringing strategy practice back into strategy teaching

In this paper, we contend that what may have been lost in strategy teaching, through over emphasis on theory and plunging-in biases, is an attention to the ‘practices’ of strategy. Many of the critiques of strategy teaching, and the current demands upon practitioners, can be addressed by more explicit recourse to a practice perspective on strategy teaching. Through identifying five core practice concepts and using an abductive method, we report on a longitudinal comparative video graphic analysis of two outstanding masters level strategy modules, to identify strategy practices in use. Each strategy module teaches very similar strategy content and with similar stated objectives, but comparison reveals that core strategy practice pillars are deployed very differently to very different effects. In addition, additional practices are identified (immersed repetition and professionalization) that extend the pillars of strategy practice. These findings show how a practice perspective can go a long way to advance the theory and practice of strategic management teaching

Recasting the dynamics of post-acquisition integration:an embeddedness perspective

M&A scholars have generally assumed that post-acquisition integration is a self-contained process. However this ignores that this process rarely unfolds as the only ongoing initiative in an organization. We contend that post-acquisition integration is not detached from other simultaneous change processes in the organizational context and this has important implications for our understanding of how integration dynamics actually evolve. To further understand this embeddedness we examine the unfolding of a post-acquisition integration process in a company faced with an unanticipated drop in demand due to the global economic crisis. Through a qualitative, longitudinal study conducted over three years, we carried out 151 interviews to uncover the unfolding of the post-acquisition process. We find that post-acquisition integration is embedded in a set of co-evolving processes. We highlight four mechanisms (coordination, cohesion, disconnection, alienation) that arise from the co-evolution of processes that either facilitate or impede integration. Our findings contribute to our understanding of post-acquisition integration dynamics by recasting the integration process as embedded in a set of co-evolving processes that shape its unfolding

Multidexterity : combining competing business models in transforming economies

In an attempt to respond to recent calls for better understanding the coexistence of multiple business models, we develop the concept of ‘multidexterity’— the ability to develop, nurture, and execute several distinctive BM strategies simultaneously across different levels and functions of the MNC and its host markets. To illustrate this approach, we describe a European healthcare firm entering the rapidly transforming economy of China and facing regulatory constraints and ambiguities in the application of industry standards. This situation is a generic challenge for MNCs entering rapidly transforming economies, which they help in turn to substantially alter and develop. We argue multidextrous business models are effective entry strategies for MNCs. They also help resolve two conceptual limitations in the BMI literature: (1) the problem of environmental contingencies and (2) the interrelatedness of factors at the macro, meso and micro levels. We address these problems from a practice approach. We provide some implications for the concept of multidexterity and business models, and address managerial challenges and prospects in developing multidextrous organizations

Opening M&A Strategy to Investors:Predictors and Outcomes of Transparency during Organisational Transition

Our study theorises and tests why organisations engage in more external transparency as an open strategy practice and the share-price related outcomes associated with these practices. Drawing from literature on information asymmetry, we suggest that organisations that depart from their existing strategy or deviate from industry norms are more likely to open up their strategy in order to escape negative evaluations by analysts and scrutiny by investors. We further investigate how the stock market responds to more openness in strategy. In a dataset comprising of a sample of 472 M&A deals and 886 associated corporate voluntary communications over a five-year period, we find that the likelihood of organisations engaging in open strategy practices that contribute to external transparency is associated with the degree to which an organisation’s strategy differs from industry norms, but is not associated with how much it varies from its existing one. Regarding organisational outcomes of increased openness in strategy, we illustrate that increasing the transparency of M&A strategy to investors through voluntary communications can bring share-price related benefits. Our research contributes to literature on open strategy, information asymmetry, and managing M&A

The impact of communications and emotions on merger and acquisition success: Does anyone care how you feel about your deal?

Most merger and acquisition (M&A) performance studies focus upon protagonist pre-deal characteristics, post-deal post-acquisition integration strategies, or a combination of the two. However, a critical part of the M&A process has been overlooked. The “deal completion” phase, between the announcement of a deal and its completion, can make the difference between success and failure. This paper examines this neglected process by focusing upon managerial practices aiming to influence investor sentiment during the deal completion phase. We contend that skillful use of acquirer voluntary communications can affect acquirer stock market price. This matters, as a higher price for acquirer stock generally improves an acquirer’s ability to purchase a target company and helps a deal to close successfully. We therefore investigate whether acquirers can influence their share price positively through the skillful use of voluntary communications, in terms of both the volume of communications and the sentiment expressed. We suggest that these voluntary communications can reduce information asymmetry between the acquirer and the financial markets, and so influence market prices. We examine 548 large M&A deals between US acquirers and US targets, completed during 2010–2016, and analyze more than 15,000 voluntary communications taking place between announcement and completion dates. Using stock volatility and cumulative abnormal returns, we find that acquirers benefit from more voluntary communications in the short term, particularly in all equity deals. We also find that the sentiment of voluntary communications matters, as those that express negative sentiment in the short term see a reduction in performance, while longer term those expressing positive sentiment see a positive relationship with stock volatility. These results show that managers can use voluntary communications to influence market perceptions of their acquisition strategies, and that sentiment matters