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Anatomy of Merger

In: Business and Management

Submitted By rasamp
Words 10332
Pages 42
Anatomy of a merger: behavior of organizational factors and processes throughout the pre- duringpost-stages (part 1)
Steven H. Appelbaum Concordia University, Montreal, Quebec, Canada Joy Gandell Concordia University, Montreal, Quebec, Canada Harry Yortis Hydro-Quebec, Montreal, Quebec, Canada Shay Proper Montreal Stock Exchange, Montreal, Quebec, Canada Francois Jobin Kruger, Inc., Trois-Rivie Âres, Quebec, Canada
Keywords
Mergers and acquisitions, Organizational behaviour, Process efficiency, Managers

Introduction
Since the late 1980s, the total number of mergers and acquisitions (M&As) has far surpassed the number that occurred throughout the 1960s. Whereas the M&As throughout the 1960s were mainly due to unions between conglomerates, the 1980s and 1990s has witnessed an increase in M&As between firms of different sizes and different industry types (Tetenbaum, 1999). The trend to engage in this type of vertical integration or diversification does not seem to show signs of diminishing in the near future. Yet, at best, the firm that initiates the merger usually only achieves normal economic profits while the value created rests almost solely with the firm that was approached (Barney, 1997). The primary purpose of merging and acquiring new firms is usually to improve overall performance (Lubatkin, 1983) by achieving synergy, or the more commonly described as the ``2 + 2 = 5'' effect (Cartwright and Cooper, 1993a; Hovers, 1971) between two business units that will increase competitive advantage (Porter, 1985; Weber, 1996). However, the mere existence of potential synergism is no guarantee that this possibility will be realized (Cartwright and Cooper, 1993a; Kitching, 1967). Recent research indicates that these M&As have a negative impact on the economic performance of the new entity (Cartwright and Cooper, 1993a; 1993b; Marks, 1999; Tetenbaum, 1999). Estimates...

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