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Understanding the performance of corporate acquisitions

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This paper examines the concept of acquisition performance to develop and test a model linking the various ways in which scholars have studied it in the past. We propose a model linking task-, transaction- and firm-level constructs under different time horizons and test it with a unique dataset created surveying partners and directors of a major consulting firm advising on the post-acquisition integration process of 146 acquisitions across industries and geographies. Results of factor and structural equations (PLS) analysis reveal that (a) there is no single underlying factor on which all the 9 measures studied load, (b) a causal chain link integration process performance to long-term firm performance (both accounting and financial returns) through the mediating role of customer retention and of overall acquisition performance, and (c) short-term window event studies do not relate to any of the other performance metrics and load on a separate factor. Implications and recommendations are drawn for theory development, research design and data analysis in future studies of acquisition performance, as well as for practicing managers.

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