Success factors in mergers and acquisitions

In terms of success factors for M&A deals, the literature diagnoses many sets of the factors covering different stages in the M&A process. As showed in Table 15, four ‘must-do’ factors were researched by Rockwell (1968) in the planning namely identifying merger objectives, specifying gains for owners, checking management ability and seeking a good fit, while labeling the other six factors such as the continuous involvement of head management, defining the business area, analyzing performance factors, resolving problem early, moving

M&A activities in the right advances at the right time, and absorbing human resource with

care as key factors for consideration. Similarly, Jennings (1985, p.37) places importance in

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the planning stage, ―Planning an acquisition strategy can help avoid a takeover marked by

poorly matched partners and maximize the potential for success‖. He also suggests that the firms focus on comprehensive analysis, consider more than financial growth, later invest considerably in managing the integration process, and always stay alert for warning signs of unsuccessful acquisitions.

Table 15 Literature summary on success factors in mergers & acquisitions Academics

Rockwell (1968) DiGeorgio (2002, 2003)

4 ‘must-do’ factors 1st stage: front-end success - selecting the right target for M&A

1. Pinpoint the objectives

2. Specify gains for owners

3. Check management ability 1. Leadership

4. Seek a good fit 2. Climate within the stakeholder team

3. Time, resources and tools for M&A analysis

4. Learning mechanisms

5. Cultural fit

6 key factors for consideration 2nd stage: integration success – achieving combination objectives

5. Involve the head man 6. Selecting the right leadership 6. Define business 7. Structuring the integration team 7. Analyze performance factors 8. Detailed planning

8. Face problem early - Communication plan

9. Make the right advances - Integration plan 10. Absorb people with care - People plan

Source: Hoang and Lapumnuaypon, 2007

Specifically about the planning issue, Jennings (1985) notes that in successful M&A projects, the M&A program in the acquiring company is well-structured, with comprehensive acquisition criteria, backed up by comprehensive analysis of various factors/areas, and

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proactive candidate identification and contact. The successful acquiring company also makes a subsequent comprehensive plan covering all functional areas and defined responsibilities and timing for the integration phase. More recent studies diagnose various success factors of M&A such as effective communication throughout the M&A process, clear goals, reasonable time frame, top management commitment and support, competence of project team, flexible and comprehensive integration plan, learning organization, and manager capabilities (Appelbaum et al., 2000a and 2000b, Schraeder and Self, 2003, Gomes et al., 2007). Galpin and Herndon (2000) construct ten key recommendations in creating a successful merger which they define as a faster and smoother integration for the resulting firm. However, many of these recommendations are those that firms have to prepare or do prior to deal closure.

DiGeorgio (2002, 2003) goes more specifically to classify the success of M&A into two stages. The first stage is called front-end success and the second stage is integration success.

The result of the front-end success is to select the right target for M&A which comprises many elements such as characteristic of leadership, the facilitating climate within the stakeholder team, adequate time and resources and tools for M&A analysis, possessing learning mechanisms, and understanding culture and organizational structure differences entailed in the analysis. The successful outcome of the second stage is to achieve the objectives, which needs selecting the right leadership, structuring the integration team, and detailed plan in terms of communication, integration, and people issue (Hoang and

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Lapumnuaypon, 2007).

2) Critical success factors in different industries

In the vast literature in the area of critical success factors, there are many reviews to identify and compare the factors for a particular type of industries. The Success factors have different relative importance across different industries evidenced by Belassi and Tukel (1996), Belout and Gauvreau (2004), and Zwikael and Globerson (2006). Especially, Belassi and Tukel (1996) noted that managerial skills are the most important factor in MIS and manufacturing industries. In the study of Belout and Gauvreau (2004), all factors accounted for in their study are conducted significant in information technology industry. In engineering industry, project mission and client acceptance seem to have important links to the project success for advisory firms. Whereas Zwikael and Globerson (2006), in their researches to prioritize the impact of the factors across industry, illustrate that project plan development is a critical factor regardless of industry type. Besides, the perceived importance of the same set of success factors is different across industries illustrated by Fryer, Antony, and Douglas. According to many studies, the relative importance of the success factors varies across different industries as shown in Table 16 to assist readers with a quick view on the literature review in this specific area.

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Table 16 Critical success factors in different industries

Source: Hong and Lapumnuaypon, 2007

Belassi and Tukel (1996) Belout and Gauvreau (2004) Zwikael and Globerson (2006)

Information technology/Soft

ware/MIS

Project size Project mission Activity definition Coordination Management support Schedule development Technology background of

project team

Project schedule Project plan development

Competence of project team Personnel Scope planning

Top management support Technical Tasks Organizational planning External factor-Technology Communications Activity duration estimating

Monitoring-control Staff acquisition

Trouble shooting Resource planning

Engineering

Coordination Client acceptance

Technology background of

project team Communications

Communication Monitoring-control

External factors-Economic,

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