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The Handbook of Mergers and Acquisitions$
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David Faulkner, Satu Teerikangas, and Richard J. Joseph

Print publication date: 2012

Print ISBN-13: 9780199601462

Published to Oxford Scholarship Online: September 2012

DOI: 10.1093/acprof:oso/9780199601462.001.0001

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Creating Value Through Mergers and Acquisitions

Creating Value Through Mergers and Acquisitions

Challenges and Opportunities

Chapter:
(p.71) Chapter 4 Creating Value Through Mergers and Acquisitions
Source:
The Handbook of Mergers and Acquisitions
Author(s):

Michael A. Hitt

David King

Hema Krishnan

Marianna Makri

Mario Schijven

Katsuhiko Shimizu

Hong Zhu

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199601462.003.0004

Mergers and acquisitions have been a popular strategy, but the research suggests that acquiring firms create little or no value. Reasons for these outcomes include an inability to create synergy, paying too high a premium, selecting inappropriate targets, and ineffective integration processes, among others. However, careful selection of targets and effectively implemented acquisitions can achieve synergy and create value. For example, targets selected that have capabilities complementary to those held by the acquiring firm provide the greatest opportunity for synergy creation. Acquisitions that provide new knowledge to the acquiring firm that can be used to enhance its competitive position often create value. For example, the knowledge gained from acquisitions can enhance innovation when the target firm has complementary science and technology to that held in the acquiring firm. In addition, cross-border acquisitions present significant opportunities, but they also provide more complex challenges for achieving synergy and creating value. Finally, research shows that executives frequently have trouble admitting failure and divesting acquisitions.

Keywords:   value creation, synergy, complementary capabilities, acquisition premiums, cross-border acquisitions

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