1 The Success of Mergers & Acquisitions in Relation to the Alignment of the Acquirer and the Target Company’s Strategic Aggressiveness and Capability Responsiveness by: Thanos Karavokiris April 26, 2008 BUS 8010 Dr. A. Lewis Dr. K. Loebbaka

2 Background - History Merger & Acquisition exist at least since the 1900s was the biggest year in M&A history. The value of world-wide M&A was $4.83 Trillion The total number of M&A transactions was 26,125

3 Background – Reasons for M&A Eliminate Competition Accomplish Market Penetration Achieve Synergies Acquire Technology Access Resources

4 Background – Reasons for M&A Improve Capabilities Realize Cost Efficiencies Attain Sales Growth Maintain & Increase Profitability

5 Research Problem Three out of four M&A fail to achieve their objectives affecting... Employment – Lay Offs The morale of the retained employees …and ultimately The performance of the entitie(s)

6 Research Question To mitigate the uncertainty and ensure the success of a M&A, the acquiring company needs to ensure that the Strategic Aggressiveness and the Capabilities Responsiveness of the target company’s, matches its own Strategic Aggressiveness and Capabilities Responsiveness within a given environment.

7 Global Model Acquirer Strat. Aggressiveness Cap. Responsiveness New Entity Strat. Aggressiveness Cap. Responsiveness Overall Performance Stakeholders Changes in Technology Changes in Business Environment Changes in Regulatory Environment Changes in Social Environment Perception of Environmental Turbulence Target Entity Strat. Aggressiveness Cap. Responsiveness Actions Influences Strategic Gap Perception of Strategic Investment Needed

8 Research Model Acquirer Strat. Aggressiveness Cap. Responsiveness Performance of New Entity Perception of Environmental Turbulence Target Entity Strat. Aggressiveness Cap. Responsiveness Actions Influences Strategic Gap Acquirer’s Executive Team

9 Research Questions What is the relationship between the Aggressiveness Gap (for both the acquiring and the target entities) and success of the new entity. What is the relationship between the Responsiveness Gap (for both the acquiring and the target entities) and success of the new entity. What is the relationship between the perception of Environmental Turbulence and the Strategic Aggressiveness (for both the acquiring and the target entities). What is the relationship between the perception of environmental turbulence and the strategic posture of the new entity.

10 Research Hypotheses There is a direct relation between the alignment of the Strategic Aggressiveness of the acquiring and the target company in the success of a merger or an acquisition. There is a direct relation between the alignment of the Capabilities Responsiveness of the acquiring and the target company in the success of a merger or an acquisition. There is a direct relation between the Strategic Gap of the Strategic Aggressiveness and the Capabilities Responsiveness of the acquiring and the target company in the success of a merger or an acquisition.

11 Variable Definition ENVIRONMENTAL TURBULENCE is characterized by the complexity and novelty of challenges in the business environment, as well as, the rapidity and visibility of upcoming changes. STRATEGIC AGGRESSIVENESS is the discontinuity and speed in which business strategies and processes are adopted and deployed in response to market issues. CAPABILITY RESPONSIVENESS is the executive team’s (and the organization’s as a whole) ability to address changes in the environment.

12 Variable Definition STRATEGIC GAP is the difference between the level of Strategic Aggressiveness and Capability Responsiveness between the acquiring and the target company. PERFORMANCE is the achievement of increases in production, sales and profitability for each on the combining companies, within three years from the merger or acquisition.

13 Data Sources SEC Internet Investment bankers Data Rooms Industry Lists

14 References Ansoff, H. I. & McDonnell E. (1990), Implanting Strategic Management, Essex, UK: Prentis Hall Int’l Marks L. M., Mirvis H.P. (2001), Making mergers and acquisitions work: Strategic and Psychological Preparation. Academy of Management, Vol. 15, No. 2, Seo, M. G. (2001), Managing Merger & Acquisition Process: An Integrative Framework. Academy of Management proceedings, ODC F3. Lorton G. A. (2006), Factors Relating Environmental Management Strategies and Performance on Environmental Issues. San Diego.