Antecedents of M&A success: The role of strategic complementarity, cultural fit, and degree and speed of integration

• Published date: 01 February 2014
• Date: 01 February 2014
• DOI: http://doi.org/10.1002/smj.2091
• Author: Kurt Matzler,Florian Bauer

Strategic Management Journal

Strat. Mgmt. J.,35: 269– 291 (2014)

Published online EarlyView 26 April 2013 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2091

Received 9 February 2011;Final revision received 16 November 2012

ANTECEDENTS OF M&A SUCCESS: THE ROLE OF

STRATEGIC COMPLEMENTARITY, CULTURAL FIT,

AND DEGREE AND SPEED OF INTEGRATION

FLORIAN BAUER1and KURT MATZLER2*

1

MCI Management Center Innsbruck, Innsbruck, Austria

2

Department of Strategic Management, Marketing and Tourism, University of

Innsbruck, Innsbruck, Austria

In this paper, we develop a comprehensive model of M&A success. We integrate fundamental

constructs of different schools and discuss their interdependencies with M&A success. Our

theoretical framework was tested empirically across a sample of 106 SME transactions in the

machinery, electronic, and logistic industries in the German-speaking part of Central Europe.

The results of our study support the demand for an integrative perspective and theory on M&A.

M&A success is a function of strategic complementarity, cultural fit, and the degree of integration.

Strategic complementarity also positively influences cultural fit and the degree of integration.

Cultural fit positively influences M&A success, but surprisingly has a negative impact on the

speed and degree of integration. The degree of integration is positively related to speed of

integration. Copyright 2013 John Wiley & Sons, Ltd.

INTRODUCTION

Next to strategic alliances and joint ventures,

mergers and acquisitions (M&A) are an important

source of external growth and corporate devel-

opment. For more than a hundred years, they

have represented an essential part in strategic

management practice and research (Cartwright,

2006). Although the number of transactions has

declined through the current financial and eco-

nomic crisis, there is strong evidence that a

new M&A wave has already started. However,

it is not the big transactions— which are quite

prominent in the media— that create the enor-

mous volume in the market for corporate con-

trol (e.g., US$1.78 trillion in 2011, according to

Keywords: M&A; strategic complementarity; cultural

compatibility; post-merger integration; M&A success

*Correspondence to: Kurt Matzler, Department of Strategic

Management, Marketing and Tourism, University of Innsbruck,

Universit¨

atsstrasse 15, A-6020 Innsbruck, Austria.

E-mail: Kurt.matzler@uibk.ac.at

Copyright 2013 John Wiley & Sons, Ltd.

Bloomberg), but it is rather the small and medium

sized enterprise (SME) transactions from which

this amount mainly derives (Jansen, 2008). Even

though SMEs play an important role for the Euro-

pean economy— e.g., they represent 99percent

of all European companies (Avram and K¨

uhne,

2008), and the last M&A wave was mainly SME

driven (Jansen, 2008; Salvato, Lassin, and Wik-

lund, 2007)— they are broadly ignored in cur-

rent research. Success rates of M&As are poor

in general, and it is regularly reported that on

average 40– 60 percent of M&As fail in creating

value (Bagchi and Rao, 1992; Bower, 2001); some

authors even speak of failure rates between of 70

and 90 percent (Christensen et al., 2011).

Since the 1970s, the amount of research in

M&A has increased enormously, and the M&A

phenomenon has been studied through several

theoretical lenses (Barkema and Schijven, 2008;

Birkinshaw, Bresman, and H˚

akanson, 2000; Lars-

son and Finkelstein, 1999). With the growing

body of research and literature, four schools

270 F. Bauer and K. Matzler

of thought, which reduce the complexity of

the research field, have become well established

(Haspeslagh and Jemison, 1991; Schewe, Lohre,

and Ortwein, 2007). Firstly, the financial eco-

nomic school— as the most prominent stream in

literature (Cartwright and Cooper, 2001; Stahl

and Voigt, 2008)— analyzes the performance and

wealth effects of M&As on the basis of stock

market-based measures (Dixon Wilcox, Chang,

and Grover, 2001; Haspeslagh and Jemison, 1991).

In so-called event studies, the share prices of buyer

and bidder companies are investigated in a certain

time frame around the announcement day (Aktas,

de Bodt, and Cousin, 2007; Haleblian and Finkel-

stein, 1999). Secondly, scholars of the strategic

management school have studied the effect of pre-

merger relatedness, perceived similarity, or com-

plementarity on performance (Cartwright, 2006;

Chatterjee, 2009; Haspeslagh and Jemison, 1991;

Larsson and Finkelstein, 1999). Thirdly, the orga-

nization behavior school investigates the effects of

transactions on organizations, organizational cul-

ture, and individuals (Birkinshaw et al., 2000;

Haspeslagh and Jemison, 1991) or the impact

of organization-related variables, e.g., acquisition

experience (Haleblian and Finkelstein, 1999; Hale-

blian, Kim, and Rajagopalan, 2006) on perfor-

mance. Studies on international M&As look at

the impact of cultural distance on M&A suc-

cess. Barkema, Bell, and Pennings (1996), for

instance, taking an organizational learning per-

spective, study the impact of cultural distance and

expansion experience on the longevity of interna-

tional market entries via acquisitions. The organi-

zation behavior school picks up premerger issues

(e.g., cultural fit or compatibility) as well as post-

merger issues (e.g., degree of integration). Lastly,

the process school (or perspective) has derived

from the strategic management and the organi-

zation behavior school (Haspeslagh and Jemison,

1991). Following the arguments of scholars in this

field, M&A performance is fostered by the M&A

process (Haspeslagh and Jemison, 1991; Jemison

and Sitkin, 1986). An effective and efficient inte-

gration process is decisive for the postmerger inte-

gration phase and, therefore, for the success of a

transaction (Birkinshaw et al., 2000).

These schools of thought are not mutually

exclusive. However, most scholars usually fol-

low an isolated perspective (Larsson and Finkel-

stein, 1999; Schewe et al., 2007). Even though

the call for an integrative perspective is not

new (Buono and Bowditch, 2003; Cartwright and

Cooper, 2001), very little research has been done

in developing a holistic understanding of M&As

and their performance (Larsson and Finkelstein,

1999; Sarkar et al., 2001). Next to the specializa-

tion on the schools of thought, M&A research is

strongly fragmented concerning the scope of anal-

ysis (Cartwright and Schoenberg, 2006). Next to

the focus on premerger issues, there is a growing

perception of the importance of the postmerger or

integration phase (Cartwright, 2006; Larsson and

Finkelstein, 1999; Stahl and Voigt, 2008). Even

though this development should be favored, there

is clear evidence that an isolated perspective on

a single phase disregards the interdependencies of

the M&A process (Cartwright, 2006; Cartwright

and Cooper, 2001; Haspeslagh and Jemison, 1991;

Larsson and Finkelstein, 1999). As prior work

clearly shows, M&A success depends on pre-

merger issues as well as on postmerger issues

(Barkema and Schijven, 2008; Bower, 2001; Stahl

and Voigt, 2008). However, the fragmentation con-

cerning schools of thought and the isolation of

certain phases “has been at the cost of a more

holistic understanding of what determines their

performance and what consequences they bring”

(Cartwright, 2006). Against the fragmented and

specialized background of M&As, the aim of this

paper is to (1) develop an integrative and more

holistic research model that connects central con-

structs of three schools of thought (strategic man-

agement, organizational behavior, and process),

and (2) generate a deeper understanding of the

interdependencies of the M&A phases and their

effects on M&A performance. Due to the impor-

tance of SMEs for the Central European economy

and the deficit of attention in the current litera-

ture, we test our research model with a sample

of SME transactions. Our paper is organized as

follows: After presenting the theoretical frame-

work, we test a complex network of antecedents of

M&A success derived from three different schools

of thought. The model tests the interdependencies

of strategic complementarity, cultural fit, speed of

integration, degree of integration, and M&A suc-

cess. The results shed light on the mechanisms

through which the constructs influence success,

and it becomes evident that taking an integrative

perspective is an important step forward in M&A

research. A better understanding of how and why

these constructs explain M&A success also yields

important implications for managers.

Copyright 2013 John Wiley & Sons, Ltd. Strat. Mgmt. J.,35: 269– 291 (2014)

DOI: 10.1002/smj