ORGANIZATIONAL-FACTORS IN POSTACQUISITION PERFORMANCE

Post acquisition success of firms depends not only on the strategic fit between the merging firms but also on the organizational integration between them. Research in economics and finance has been focused on the stock market data and has neglected the impact of organizational variables on performance. The study reported here is based on 31 acquisitions for which data have been obtained from executives in the acquired divisions as well as the corporate officers by structured interviews and questionnaires. The study shows a lack of relationship between the professed motives of acquisition and post acquisition performance. It seems that the lure of quick profitable growth through acquisition does not often materialize regardless of motive. The level of integration between the acquired division and the its parent is related with performance measured in terms of sales, profit, return on investment, market share growth, innovation, and broadening of customer base. The post-acquisition performance is also dependent on a variety of factors and assistance accorded to the division by the corporate organization. Intensive communication between the acquired division and the other organizational units on technology, joint projects, etc. are key elements in sharing the strategic capabilities. Increased level of formalization in resource allocation and other management decision areas adversely affects performance. Turnover of key technical and managerial personnel negatively affects performance. Prior understanding of the business of the acquired firm by the acquiring organization is helpful in post acquisition period. Our study point to the old saying that there is many a slip between the cup and the lip. Management of acquired units need more understanding and an attitude of investment in future. Many organizations have rushed into the game of acquisitions without proper organizational considerations and paid for their mistakes. © 1990 IEEE