British Journal of Management, Vol. 9, 91-114 (1998)

Attributes of Successful and Unsuccessful Acquisitions of US Firms^
Michael Hitt,* Jeffrey Harrison,^ R. Duane Ireland* arid Aleta Best§
*Lowry Mays College of Business Administration, Texas A&M University, College Station, TX 77843-4221, •College of Business Administration, University of Central Florida, Orlando, FL 32816, 'Hankamer School of Business, Baylor University, Waco, TX 76798-8004, and ^College of Business and Industry, University of Massachusetts Dartmouth, North Dartmouth, MA 02747, USA Acquisitive growth strategies continue to be popular, in spite of increasing evidence that they often do not enhance the financial performance of acquiring firms and may adversely affect innovation. However, some acquisitions are associated with both increases in financial performance and a strengthened commitment to R&D while others experience decreases in both. Multiple theories have been offered to explain acquisitions and their outcomes, but few have received strong empirical support. This paper describes a multiple rater, multiple-case study of acquisitions that had highly favourable outcomes and others that experienced highly unfavourable outcomes. All twelve of the high performing acquisitions studied were found to exhibit the dual characteristics offiriendlinessduring acquisition negotiations and resource complementarities between the two firms. Additionally, debt played an important role in the success (low to moderate debt) or lack of success (high or extraordinary debt) in 21 of the 24 acquisitions studied. Inadequate target evaluation was a factor in 11 of the 12 acquisitions with low performance. Importantly, the results of both sets of acquisitions suggested that a configuration of attributes affected post-acquisition performance. Other findings both supported and contradicted commonly held beliefs about acquisitions, as well as highlighted variables not typically associated with acquisition strategies. The study provides directions for future theory development and empirical research on acquisitions.

Introduction
For many years, acquisitions have been a popular strategy (Hoskisson and Hitt, 1994). For some firms, acquisitions have become a wellinstitutionalized phenomenon strongly influencing organizational structures and behaviours (Hirsch, 1986; Pablo, 1994). Clearly, some organizations consider acquisitions to be a superior method of investing corporate resources (Bruton, Oviatt and White, 1994; Pablo, 1994). ' We thank our colleagues Jean Bartunek, Gibb Dyer, Sydney Finkelstein, Vance Fried, Graham Hubbard, Chet Miller and Hugh O'Neill for comments on earlier drafts of this manuscript. © 1998 British Academy of Management

The amount of resources companies dedicated to acquisitive growth increased steadily between the middle of the 1960s and the end of the 1980s (Weston and Chung, 1990), but the rate of acquisitions slowed slightly during the early 1990s. Between 1990 and 1992, for example, approximately $222 billion was spent on acquisitions (Pablo, 1994). However, acquisition activity began to increase in 1992 and 1993 with more dollars invested in acquisitions during 1994, 1995 and 1996 than in any previous year. In 1996 over $1 trillion was spent on acquisitions globally with $660 billion in the USA (Lipin, 1997). Thus, the USA was the most active followed by Great Britain and Germany (Koretz, 1997). This level of activity suggests that the fifth merger wave of this

92 century has begun and may be the greatest in history (Whitford, 1997). In spite of their popularity as a growth strategy, acquisitions may not, on average, provide many financial benefits for acquiring firms (Carper, 1990; Datta, Pinches and Narayanan, 1992; Jensen, 1988; Loderer and Martin, 1992; Porter, 1987; Ravenscraft and Scherer, 1987). Equally disturbing, there is evidence that acquisition activity can lead to reductions in internally developed innovation (Hitt, Hoskisson, Ireland and Harrison, 1991a; Hitt, Hoskisson, Ireland and Harrison, 1991b; Hitt, Hoskisson, Johnson and Moesel, 1996). The fact that acquisitive growth is a significant firm strategy and many acquisitions are not successful suggests an inadequate theoretical and practical understanding of this complex phenomenon. Consequently, the purpose of this research was to examine thoroughly a set of acquisitions that produced successful outcomes compared to another set that produced unsuccessful outcomes. The successful acquisitions defied the patterns described and thus led to increased financial performance and greater investment in R&D. The unsuccessful set produced poor financial performance, coupled with reductions in R&D investment. Each set of acquisitions can then be considered outliers. Our purpose was to identify common attributes of these acquisitions to advance theoretical understanding of how to succeed and avoid failure using an acquisition strategy. The analytical method used to make these comparisons was a systematic, multiple rater, multiplecase analysis of acquisitions associated with positive or negative changes in both financial performance and investments in R&D (as measured by R&D intensity). Yin (1989) argued that case studies are appropriate in answering 'why' questions about contemporary events over which the investigator has little or no control. In this study, the main research question is why some acquisitions lead to increases in both financial performance and R&D investments while others lead to reductions in both. Yin (1989) also suggested that case studies are appropriate for generating theoretical propositions. The present study resulted in several testable research propositions. Following is a summary outline of the basic theory and evidence regarding acquisition activities. This theory and evidence provides a foundation for describing the study's research question and interpreting the findings reported herein.

M. Hitt, J. Harrison, R. D. Ireland and A. Best

Prevalent theories of acquisitions Resource-based view. A theoretical perspective that partially supports several major views on acquisitions is the resource-based view of the firm (Barney, 1991). Applied to acquisitions, this view suggests that resources may motivate and direct acquisitive growth. First, firms with specific types of resources may seek acquisitive growth. For example, firms with significant free cash flows may seek to invest them by acquiring businesses to derive greater returns. Investing free cash flows in this way, as opposed to holding them, may also demotivate future takeover attempts. Second, a firm may attempt to gain economies of scope by acquiring a business in which it can apply its core competence (Peteraf, 1993). A firm may also use an acquisition to buffer its core competence or to combine with resources from the acquired firm to make its core competence less imitable (Harrison, Hitt, Hoskisson and Ireland, 1991). In effect, the acquisition may create cospecialized assets (Teece, 1986). Applying the resource-based view to acquisitions is congruent with Barney's (1988) arguments that sustainable competitive advantage may accrue from the realization of private synergy that cannot be easily imitated. Acquisition process. An alternative theoretical approach focuses on the acquisition process. Among the most recognized proponents of this approach are Haspeslagh and Jemison (1991a, 1991b). Based on a set of case studies, they suggest how to best manage the acquisition process to create firm value. They argue that acquisitions create four managerial challenges: 1 ensuring consistency of the acquisition with the firm's current strategic direction 2 following a quality pre-acquisition decisionmaking process (e.g. choosing the right business for acquisition) 3 effectively integrating the acquired firm into the existing business 4 fostering learning from the acquisition (acquisition specific and more general learning) (Haspeslagh and Jemison, 1991b). Perhaps, the attribute receiving the most attention from other scholars has been the importance of post-acquisition integration to create value.

Attributes of Successful and Unsuccessful Acquisitions of US Firms Acquisition outcomes. Several theoretical perspectives have been advanced to explain the performance of acquisitions. The most common theoretical rationales suggesting a potential positive effect of acquisitions on firm performance include the following: 1 the merged firm achieves greater market power through increased market share or multipoint competition 2 the merged firm gains economies of scale and/or scope by combining complementary capabilities of the two firms, and 3 the merged firm can access capital at lower costs (Weston, Chung and Hoag, 1990; Dranove and Shanley, 1995; Hitt, Ireland and Hoskisson, 1997). Other theories explain why acquisitions may not achieve positive performance enhancing effects. Barney (1988), for example, argued that private (unknown to others) and uniquely valuable (unavailable to potential competitors) synergy is a prerequisite for a successful acquisition. Without such synergy, potential acquiring firms bid the price for target firms to amounts equal to or greater than their value. Alternatively, Roll (1986) suggested that managerial hubris explains why acquiring firms sometimes make excessive bids. Paying high premiums reduces the likelihood that acquiring firms' shareholders will benefit from an acquisition (Datta et al., 1992). As an alternative to these theoretical perspectives, Jensen (1988) argued that acquisitive takeovers can produce higher firm performance when management teams of firms that are underperforming their potential are replaced because the acquiring firm can more efficiently manage the acquired firm's assets. Because management teams in the acquired firms are replaced, the acquisitions are almost always hostile (acquired firm managers fight the takeover). The active market for corporate control during the 1980s reflects the conviction that takeovers were often completed to eliminate managers' non-value maximizing behaviours. There have been other more focused theoretical notions regarding the ability of acquisitions to create firm value. Among those, Hitt, Hoskisson and Ireland (1990) argue that an active acquisition strategy over time causes firms to shift from the use of strategic to financial controls. In turn.

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heavy emphasis on financial controls reduces divisional managers' commitment to innovation. Given the growing importance of innovation for competitiveness in global markets (Franko, 1989), reduction in innovation may harm firm performance in a variety of industries. Thus, several theories have been advanced to explain acquisitions and their success or the lack thereof. Most are relatively narrow (e.g. focus on process or outcomes such as innovation) and while some are complementary, others are independent (i.e. focus on different and independent attributes such as managerial hubris and hostile takeovers). Unfortunately, none of these theories is able to capture the essence of the complex phenomenon of acquisitions, because they are incomplete. Thus, we have an inadequate understanding of acquisitions. This is clearly evident in the examination of the empirical findings on acquisitions. Empirical evidence regarding the acquisitive growth strategy Shareholders in acquired firms typically derive significant value from acquisitions (Datta et al., 1992; Jensen, 1988). Some evidence shows that acquired firm shareholders gain an average of 20% between the announcement of a proposed acquisition and its completion (The Economist, September 10,1994, p. 87). However, the value of acquisitions for acquiring firm shareholders is less conclusive (Amihud, Dodd and Weinstein, 1986; Carper, 1990; Datta et al., 1992; Lubatkin, 1987; Lubatkin and O'Neill, 1987). Some research (e.g. Franks, Harris and Titman, 1991) suggests that there is no significant performance difference between acquiring firms and their counterparts that do not engage in acquisitions. However, other results do not support use of an acquisition strategy. Loderer and Martin (1992) reported that an investment in each acquiring firm on the date of 10 000 acquisitions that took place between 1966 and 1986, and held for 500 trading days, would have yielded an equally weighted return of 21%. In comparison, a share in the market portfolio would have yielded a return of 36%, more than 50% higher. Even after controlUng for risk, Loderer and Martin found that acquiring firms often underperform the market. Other results suggest benefits for acquiring firm shareholders only in specific types of acquisitions.

94 For example, Hopkins (1987) found benefits for acquiring firm shareholders when there was strategic fit, or similar strategic characteristics between the target and acquiring firms. Singh and Montgomery (1987) found such benefits in related acquisitions. Kusewitt (1985) discovered that financial performance was higher when merged firms shared a common industry. These works provide coarse-grained support for the resource-based view and the importance of synergy advanced by Barney (1988). Furthermore, Harrison et al. (1991) found support for the importance of private synergy. Their findings suggested that when the acquiring and acquired firms emphasized different but complementary resources (thereby producing less public similarities), the merged firm achieved higher performance. Other evidence suggests that the market for corporate control may not be efficient as assumed. In fact, Walsh and Kosnik (1993) found that the top corporate raiders in the 1980s often targeted firms outperforming their industries, firms that can be assumed to be managed effectively and efficiently. Additionally, Davis and Stout (1992) found that firms with a higher return on equity (ROE) were more likely to receive a tender offer than those with a lower ROE. They concluded that these results did not provide clear support for any single account for why takeovers (acquisitions) occur. Hitt et al. (1991a, 1991b) found that acquisitions have a negative effect on both R&D intensity (a measure of R&D inputs) and patent intensity (a measure of R&D outputs). By affecting the 'championing culture' that supports organizational innovation (Burgelman, 1983), acquisitions may lower managers' incentives to develop new product and process ideas (Hitt et al., 1990). More recent research shows that firms active in the market for corporate control introduce fewer new products to the market regardless of their industry than firms not active in the market for corporate control (Hitt et al., 1996). There has been little direct empirical evidence regarding the popular theoretical notions posed by Roll (1986) and Haspeslagh and Jemison (1991a). Davis and Stout (1992) concluded that current organizational theories are not useful in explaining acquisition behaviour and success. Given the variety of theories, none of which has been found to dominate the explanation of acquisitions, and the conflicting evidence regarding

M. Hitt, J. Harrison, R. D. Ireland and A. Best the success of the acquisitive growth strategy, more work is necessary to help understand this complex phenomenon. While there has been a significant amount of research on acquisition performance, little research has focused on helping us better understand how acquisitions can be successful. This is surprising given that acquisitions represent a dominant strategic trend in industry. Thus, using an inductive method, the purpose of this research was to identify and understand conditions and attributes contributing to acquisition success and failure.

Methods
Assumptions associated with widely-accepted theory and measures can sometimes buffer researchers from actual events and outcomes (Downey and Ireland, 1988). Traditional hypothesis-testing research, by definition, places boundaries (constraints) on what can be learned from a project. Large sample hypothesis-testing research often makes only an incremental contribution to theory. That is because empirical research must build on existing theory (to be publishable) and because traditional methods often constrain researchers to minor extensions to current understanding. Thus, a 'straightjacket' mindset develops that produces only incremental contributions beyond current theory. Because of the need to develop a more complete theoretical explanation for acquisitions outcomes (due to the inadequacies of prior theory), we chose a more inductive case-study method of analysis. An inductive method allows unknown attributes and groupings to emerge and permits a better understanding of complex phenomena (Sackmann, 1992; Van Maanen, 1979). There are several inductive methods; we chose one which simultaneously allowed the development of considerable depth of information along with the use of a relatively large sample to enhance the generalizability of the findings. The purpose of this study was to develop theory about successful and unsuccessful acquisitions by analysing outliers ('best' and 'worst') drawn from a large sample of acquisitions. The case-study method applied in this study represented an empirical inquiry using multiple sources of evidence to investigate a phenomenon, within its real-life context, where the boundaries between phenomenon and context are not clearly

Attributes of Successful and Unsuccessful Acquisitions of US Firms evident (Yin, 1981). In the case of acquisitions, these boundaries cannot be identified easily, due to the presence of at least two firms (bidder and target) from potentially different contexts and often many other firms or stakeholders (i.e. other bidders, competitors, unions and government agencies). Another advantage of an intensive and systematic case-research design is that it provides an in-depth longitudinal (seven years in this study) examination of each acquisition's evolution and an opportunity to identify patterns or 'bundles' of attributes (Larson, 1992). The principal advantage associated with identification of multivariable pattems is that some variables may be effective predictors of performance only when combined with others. The case-study approach applied herein recognizes the importance of both theory and rival theory as a part of theory development (Yin, 1989). In other words, if successful acquisitions have characteristics not held by unsuccessful ones, and vice versa, case analysis may reveal why one set of factors leads to increased firm performance and another set leads to reduced firm performance following an acquisition. This study applied a multiple rater, multiple-case design based on the work of Eisenhardt (1989), Elsbach and Sutton (1992), and Yin (1989).

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was calculated as R&D expenditures divided by total annual firm sales. R&D intensity was also adjusted by subtracting average industry R&D intensity. R&D intensity has been used frequently to indicate a firm's commitment to innovative activity, which can have a substantial impact on future performance (Baysinger and Hoskisson, 1989; Baysinger, Kosnik and Turk, 1991; Hitt etal., 1991a, 1991b; Hoskisson and Johnson, 1992) and has been found to be positively related to innovation output measures such as patents and new products (Hitt et al., 1991a, Hitt et al., 1996). Consequently, these two variables served well our initial objective to identify for in-depth study those companies with positive changes in financial performance and an increased emphasis on R&D and those with negative changes in financial performance and a reduced emphasis on R&D. To control for the effects of major regulatory changes and to increase generalizability to the present day, we eliminated from the sample acquisitions tiiat occurred during the 1970s (one-third of the initial sample). Also, to ensure that the target had an adequate impact on the merged firm, we chose only those acquisitions in which the acquirer was not more than ten times larger than the target (approximately half of the initial sample). From the final data set, we identified two sets of acquisitions, successful and unsuccessful. There is precedence for studying sets of successful and Sample unsuccessful firms (cf. D'Aveni and MacMillan, 1990). Successful acquisitions were defined as The sample was drawn from a collection of those that showed increases in industry-adjusted acquisitions identified originally by Hitt and his performance (ROA) and industry-adjusted R&D colleagues (1991a), who used Standard and Poors' COMPUSTAT Research Files and Moody's intensity subsequent to the acquisition. There Industrial Manual to select over 1000 acquisitions completed during the 1970s and 1980s. Of these, example, one of the successful acquisitions studied 191 had complete data for industry-adjusted retum was SmithKline's acquisition of Beckman Instruments. on assets (ROA) and industry-adjusted R&D Market analysts initially criticized the SmithKline action intensity for three years prior to (for both firms) because the intended synergy was not visible. However, and following (combined firm) the acquisition. SmithKline intended to change its core business and the Beckman acquisition played a major role in making ROA was calculated as net income after taxes this change. SmithKline maintained secrecy about the divided by total assets. Firm ROA was adjusted intended change until well after the acquisition was by subtracting average industry ROA. ROA is completed. It also may have avoided rival bids by mainwidely used in strategic management research taining secrecy about its intended actions. Additionally, (Hoskisson and Hitt, 1990).^ R&D intensity even where potential private synergy is identifiable by
^ A market measure of firm performance was considered but rejected for several reasons. In particular, if private synergy is truly possible, it may not be recognized by the market because of information asymmetries. For others in the market, managers may not be able to achieve it after the twofirmsare integrated (Haspeslagh and Jemison, 1991a). As a result, we feel that accounting measures may be superior to market measures as indicators of performance for the purpose of this research.

96 were only 12 pairs of firms exhibiting both of these characteristics (see Table 1). The second set consisted of 12 acquisitions with the greatest reductions in industry-adjusted performance (ROA) and industry-adjusted R&D intensity subsequent to the acquisition. As expected, there were many acquisitions in the data set with negative changes in both performance and R&D intensity (Hitt et al., 1991a). However, to compare success with failure, we identified the bottom 12 pairs for which secondary information was available (see Table 1).' Thus, our final sample included 24 pairs of firms or 48 firms in total, large for a case study. The successful set of firms experienced an average increase in ROA of 234% over a three-year period following completion of the acquisition. Alternatively, the unsuccessful set of firms experienced a reduction in ROA averaging 3525% (these percentages are exacerbated by small pre-acquisition numbers). Average actual ROA for this set of firms was -0.104 with an average reduction from the pre-acquisition period of -0.213. Thus, many of the firms involved in the unsuccessful acquisitions changed from a positive ROA to a significantly negative ROA.

M. Hitt, J. Harrison, R. D. Ireland and A. Best Data collection We used the ABI/INFORM database, the Business Periodicals Index, the Reader's Guide to Periodicals, the Wall Street Journal Index, and the Applied Science and Technology Index to identify all published materials on the 48 firms for the relevant seven-year time period (three years prior to the acquisition for both acquiring and target firms, the year of the acquisition and three years after the acquisition year for the merged firm). There are precedents in the use of popular and business press accounts for scholarly research (e.g. Chen and Meindl, 1991; House, Spangler and Woycke, 1991). We then collected data on these firms from these published materials. We also examined annual reports for the merged firm for the year of the acquisition (and sometimes before and thereafter, if needed) and cases in business texts that discussed either or both companies, or the acquisition, during the relevant time period (a list of all sources used is available from the authors). Data analysis As noted previously, this study applied a multiplecase design that allowed a replication logic

' There have been Harvard cases written on Cooper Industries (Stuart and Collis, 1991b) and on competition in the pet food industry with special emphasis on the Quaker Oats acquisition of Anderson Clayton (Stuart & Collis, 1991a). The Cooper Industries case praises the firm's successful corporate strategy of acquiring diversified firms. This is in contrast to our categorization of the Cooper Industries acquisition of Crouse-Hinds in the unsuccessful group. Over time. Cooper Industries has experienced considerable success with its acquisition strategy but encountered significant problems with the specific acquisition of Crouse-Hinds. Crouse-Hinds represented a significant diversification into a new industry for Cooper. Crouse-Hinds was equal in size to Cooper industries and the firm had to take on significant debt to finance the acquisition. Wall Street analysts criticized the acquisition because of the unrelated diversification and debt acquired. Using an event study, we found a statistically significant negative abnormal return from the acquisition suggesting the market's displeasure with the move. We also found a negative market return for Cooper over a period of three years after the acquisition. The Quaker Qats/Anderson Clayton case is more complicated. Some criticized Quaker for acquiring Anderson Clayton suggesting that its market share declined thereafter. However, closer scrutiny suggests a different view. Ralston Purina, the pet food market

leader, attempted to acquire Anderson Clayton. If it had been successful, it would have gained a dominant market share in the dog food market to complement its strong market share in the other pet food segments. Thus, Quaker Qats' acquisition of Anderson Clayton may have been a defensive move to prevent a near monopoly by Ralston Purina in the pet food market. Undoubtedly, the acquisition sparked strategic responses and intense competition from others in order to survive. Quaker Qats' overall share of the pet foods market increased from 5.9% in 1986 to 13.1% in 1987 with the acquisition of Anderson Clayton. However, with the substantive competition noted above, its pet food market share was 10.9% in 1989 (interestingly, Ralston Purina's overall market share also declined during this time). But, this does not tell the whole story. Quaker Qats still maintained market shares of 52.9% and 80% in the moist dog food and soft-dry dog food segments, respectively, in 1989. These were acquired from Anderson Clayton. Thus, the acquisition made Quaker Qats a major competitor in the pet food industry. Furthermore, we found a positive change in market returns for Quaker Qats over the three-year period following the acquisition. We concluded that these facts supported our final categorization of the Cooper Industries/Crouse-Hinds and Quaker Qats/Anderson Clayton acquisitions into their respective groups for our study.

Attributes of Successful and Unsuccessful Acquisitions of US Firms
Table 1. Merged firms with increases and reduciions in industry-adjusted ROA and R&D intensity Merged firms with increases Bidding firm Allied Computer Associates Dairy Mart Fred Meyer General Dynamics Instrument Systems Quaker Oats Raytheon SmithKline Textron Unilever PLC USG Corp Target firm Signal Companies UCCEL Conna Corp Grand Central Cessna Aircraft Clopay Corp Anderson Clayton Beech Aircraft Beckman Instruments Avco Cheseborough Ponds Masonite Year of acquisition 1985 1987 1986 1984 1986 1986 1986 1980 1982 1985 1987 1984 Related industries Aerospace and automotive Information systems Convenience stores Retail stores Defence/aviation Industrial manufacturing Consumer products Aviation electronics/aviation Pharmaceuticals/medical instruments Aviation/defence Consumer products Industrial manufacturing

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Merged firms witli reductions Bidding firm Ashland Oil Avon Products Chrysler Cooper Industries Cooper Laboratories Corvus Systems Datapoint Ecolab
HBO Target firm

Year of acquisition 1981 1982 1987 1981 1981 1985 1980 1987 1985 1984 1982 1982

Industries Petroleum/pollution control Cosmetics and hospital supplies/chemicals Automobiles Diversified manufacturing/electrical products Health care products/Medical and dental equipment Information systems Information systems Institutional chemicals/residential chemicals Information systems/management consulting Plastics, cosmetics/toiletries, real estate Precision instrumentation Steel/petroleum

Kleer Vu Industries Kratos US Steel

US Filter Mallinckrodt American Motors Crouse-Hinds Cavitron Onyx IMI Inforex Chemlawn Amherst Associates Nestle-Lemur Keuffel & Esser Marathon Oil

(Eisenhardt, 1989). Data were evaluated for the 12 cases in each of two sets, successful and unsuccessful. Within each set, the cases were examined sequentially, similar to a series of experiments, with each case serving to confirm or disconfirm inferences drawn from the others (Yin, 1989). This is an iterative approach, similar to that used by Elsbach and Sutton (1992) (see also Boje, 1991; Kahn, 1993 for iterative approaches). Three raters (members of the research team) independently analysed each of the cases within a set. Each rater read and analysed a total of over 4000 pages of information on firms in the sample. The analyses focused on company histories, rationales for the acquisition, pre- and postacquisition activities, organizational characteristics, strategic focus, firm interrelationships, management attitudes and actions and the activities of external stakeholders, such as competitors or other bidders. A list of traits was identified during the first case analysis that reflected the influence of those characteristics on the performance

of the merged firm. Each case was then evaluated based on the presence or absence of those traits. New traits were added as they were identified during subsequent case analyses. After completing their analyses, the raters compared and contrasted their case notes and conclusions. There was strong agreement in the raters' conclusions (initial agreement on approximately 70-80% of the traits). However, where differences occurred, cases were re-examined and inferences tested. The final conclusions represented agreement among the three judges concerning the attributes of successful and unsuccessful acquisitions. To control for individual biases in the evaluation of information, each of the three raters evaluated the information independently. To include an attribute all three judges had to agree. Also a total of four raters were used allowing one different rater on each of the two sets of acquisitions. This was designed to avoid conclusions on one set of data affecting the conclusions on the other one. The next section outlines these results.

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Tabte 2. Attributes of successful acquisitions Acquisitions

M. Hitt, J. Harrison, R. D. Ireland and A. Best

Attributes Complementarities Friendly Low to Change Emphasis on Focus on Careful Financial acquisitions moderate experience innovation core business selection slack debt of targets

Quaker Oats/ Anderson Clayton Ratheon/ Beech Aircraft Computer Associates/UCCEL Allied/Signal Companies

x x x x

x x x x x
X

x x x x x
X X

x x x x x

x x x x

x x x

xx xx x x x x

Unilever/ Cheseborough-Ponds x Dairy Mart/
CONNA X

X

Fred Meyer/ Grand Central General Dynamics/ Cessna Aircraft SmithKline/ Beckman Instruments USG/ Masonite

x x

x x

x

x x

x x x

x x X

x x X
X X X

x x x x

x

x

Instrument Systems/ Clopay X Textron/
AVCO X

x

Attributes of successful and unsuccessful acquisitions
As shown in Tables 2 and 3, our in-depth case analyses identified eight attributes linked to the 12 successful acquisitions and six attributes linked to the 12 unsuccessful acquisitions studied. Below, we consider each of these attributes in more detail. Attributes of successful acquisitions Complementary assets and/or resources. An important finding from the case analyses was that all acquired firms in the successful acquisition group had assets and/or resources that were complementary to, at least, some of the acquiring firms' assets. For example, Quaker Oats acquired Anderson Clayton for the expressed purpose of

gaining control of its Gaines pet food business. In particular, the Gaines pet food business had wellknown established national brands such as Gaines Burgers, Gravy Train, Top Choice, and Cycle Dog Foods. Integration of the Gaines pet food business with the pet foods division in Quaker Qats doubled the size of that division, thereby significantly increasing its market power (and at the same time, reducing significant competition) and achieving operating synergies to enhance division profitability. In fact, its overall market share in the pet food business increased from 5.9% to 13.1% for a positive 122% change with the acquisition. The acquisition also prevented the market leader, Ralston Purina, from dominating the market through its attempted purchase of Anderson Clayton. Even after three years of retaliatory responses from Ralston Purina and other

Attributes of Successful and Unsuccessful Acquisitions of US Firms
Tabte 3. Attributes of unsuccessfut acquisitions Acquisitions Large or extraordinary debt Ashland Oil/ US Filter Avon Products/ Mallinckrodt Ecolab/ Chemlawn HBO/ Amherst Associates Chrysler/ American Motors Datapoint/ Inforex US Steel/ Marathon Oil Cooper Laboratories/ Cavitron Corvus Systems/ Onyx IMI Kleer Vu Industries/ Nestle-Lemur Cooper Industries/ Crouse-Hinds Kratos/ Keuffel & Esser x x x x x x x x x x x x x x x x x x x x x x x x x x Inadequate Ethical target concerns/ evaluation opportunism x x x x x x x x x x x x x x x x x x Attributes TMT and/or structure changes x x x x x x x x x Multiple acquisitions/ lack of control

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Diversification

x x x x

competitors (e.g. significant price reductions), Quaker Qats maintained market shares of over 50% in the moist dog food market segment and 80% of the soft-dry dog food market segment both based largely on the acquisition of Anderson Clayton. Unilever, a large multinational firm headquartered in Great Britain with significant sales in European markets, was frustrated because of problems in introducing new products in a competitive European market. Thus, Unilever's acquisition of Cheseborough-Ponds provided access to a large US market, because approximately 75% of Cheseborough-Ponds' sales were in the USA. Therefore, the acquisition of Cheseborough-Ponds provided additional opportunities for both firms to expand globally. The scale economies and the successful skin product lines from CheseboroughPonds, such as Vaseline and Vaseline Intensive

Care, along with the new international markets provided for both firms, produced significant positive synergy for the merged firm. Interestingly, the SmithKline acquisition of Beckman Instruments provided less obvious complementaries and positive synergy to the casual observer. However, the strategic intent was to combine the SmithKline strength in pharmaceuticals and health care with Beckman Instruments' strength in diagnostic technology to enhance biomedical research. Additionally, the cash generated from SmithKline's pharmaceutical business, in particular its Tagamet anti-ulcer drug, could be used to finance Beckman's R&D. Both firms had a commitment to research in molecular biology and biotechnology. Thus, in summary, the acquired firm's complementary assets and/or resources provided to the acquiring firm produced a high probability

100 of achieving positive synergy and a sustainable competitive advantage in the firms' markets. Friendly acquisition. While the case analyses showed that the market for corporate control played an important role in many of the acquisitions, it did so in a way atypical of many acquisitions completed in the 1980s. That is, all 12 of the successful acquisitions were friendly. In some cases, the acquiring firm represented a white knight to the acquired firm. For example, Masonite was a prime takeover target of Pritzkers, Belzberg and then General Felt, all of which Masonite fought. However, USG and Masonite had complementary products, markets and business philosophies. In fact, Masonite sought a white knight through its financial adviser when faced with a takeover attempt by General Felt. For Masonite, USG offered the opportunity to maintain some independence while achieving synergies. Another friendly acquisition involved the Dairy Mart acquisition of CONNA. In fact, CONNA was pursued by Convenient Food Mart and chose to be acquired by Dairy Mart instead. Dairy Mart was a convenience store chain and CONNA owned 370 convenience stores. Therefore, this represented a horizontal acquisition. The fact that it was a friendly horizontal acquisition produced a faster and more effective integration of CONNA into the Dairy Mart Corporation. Low-to-moderate debt position. In 10 of the 12 cases studied, the merged firm was able to maintain, or achieve within a short period of time, a low-to-moderate debt position after the merger. In some of the acquisitions, no debt was used. For example, the Raytheon acquisition of Beech Aircraft involved no cash outlays but rather an exchange of stock between the two firms. Alternatively, Textron's $1.4 billion acquisition of AVCO was financed largely by debt. In fact, Textron's debtto-equity ratio was 16% prior to the acquisition, but 70% thereafter. However, Textron sold off businesses, most from its own firm and a few of AVCO's, in order to reduce its debt-to-equity ratio of 40%. An alternative approach was used by Unilever to purchase Cheseborough-Ponds. First, it partially financed the $3.1 billion acquisition with $1.5 billion in cash. The rest was financed with debt, but shortly thereafter Unilever sold several of the Cheseborough-Ponds businesses to reduce its total debt load.

M. Hitt, J. Harrison, R. D. Ireland and A. Best Maintaining a low-to-moderate debt position produces a lower cost of financing the acquisition and a lower risk of future bankruptcy. Equally important, it also avoids the trade-offs often associated with high debt (Baysinger and Hoskisson, 1989; Hitt et al.., 1991a, 1991b; Hoskisson and Hitt, 1994). Research has shown that, often, firms with high debt and high debt costs trade off long-term investments (e.g. in R&D and capital equipment). Such trade-offs can have significant negative effects on a firm's strategic competitiveness (Hitt et al., 1990; Hitt et al., 1991b; Hitt et al., 1997). Change experience and flexibility skills. In twothirds of the acquisitions, the acquiring firm or both the acquiring and target firms had considerable experience in implementing change in the years prior to the acquisition. As a result, these firms were more flexible, with developed adaptation skills. For example, those that had been active acquirers had more experience integrating different corporate cultures. This experience enabled them to achieve a dynamic equilibrium more quickly and smoothly in the integration of the two firms' assets and resources. Allied was an active acquirer prior to its purchase of Signal companies. It purchased Bendix in 1983 and Eustar in 1984. Bendix's aerospace operations became one of the most profitable of Allied's major business groups. In 1984, Bendix, a business unit of Allied at the time, acquired King Radio, a manufacturer of aircraft communication, navigation and flight control systems. Since 1979, Allied had completed nearly 40 acquisitions and increased its size by 400%. Signal also had acquisition experience. For example. Signal acquired Wheelabrator and sold its money-losing Mack Truck Division. It ended up with $500 million in cash, $8 billion in annual sales and a debt-to-equity ratio of only 25%. Therefore, it was a prime target and an excellent acquisition by Allied. However, Allied had to sell Bendix's aerospace unit to receive the Justice Department's approval to buy Signal. In addition. Allied sold off 28 unwanted units in 1985, mainly unprofitable ones acquired in past deals, through a $3 billion spin-off. Therefore, these two firms had considerable experience in acquisition and restructuring. Similarly, prior to the acquisition of Anderson Clayton, Quaker Oats had used its significant cash flow from current businesses in worldwide

Attributes of Successful and Unsuccessful Acquisitions of US Firms groceries and toys to make several large acquisitions, including those of Stokeley Van Camp and Golden Grains. Concomitantly, Anderson Clayton, which had been an active acquirer in prior years, was in the process of restructuring and divesting some of its problem businesses. It sold the American Founder's Life Insurance Company and its Brazilian and Mexican businesses in 1985. By making these sales, Anderson Clayton was able to eliminate its long-term debt in 1986, while setting a new record sales volume. In this case, both firms had significant change experience and were quite successful in their operations. Both Computer Associates (acquired UCCEL) and Textron (acquired AVCO) were active in the acquisition market and highly experienced in making acquisitions and integrating them into the firm. UCCEL was the largest independent competitor of Computer Associates and thus, represented a horizontal acquisition. While Textron was a conglomerate, approximately 50% of its businesses were related to aerospace. Furthermore, the AVCO acquisition was related to some of its businesses. Therefore, where there was considerable experience, particularly on the part of the acquiring firm, integration between the two firms was achieved more rapidly and effectively. Furthermore, it was easier for the acquiring firm to achieve synergy between its assets and the assets and/or other resources (e.g. intangible) of the acquired firm. Emphasis on R&D and innovation. In contrast to current research suggesting that an active acquisition strategy normally produced a lower managerial commitment to innovation (e.g. Hitt et al., 1990; Hitt et al, 1991a), two-thirds of the successful merged firms maintained an emphasis on innovation, often through healthy investments in research and development. In fact, the acquiring firms frequently had strategic policies to maintain an emphasis on research and development and innovation. For example. General Dynamics had a heavy emphasis on research and development and was able to increase the investment in R&D in Cessna after the acquisition was consummated. In fact, the potential synergies between the two firms were based on the development of new technology to build new aircraft and other related aviation products. Of course, the SmithKline acquisition of Beckman Instruments had particular significance

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because of both firms' commitment to research in molecular biology and biotechnology. In earlier years, SmithKline had been rather conservative in its R&D investments. However, after discovering Tagamet, it significantly increased its investment in R&D, to include a new $20 million laboratory for molecular biology research. Computer Associates, while an active acquirer, also spent more than the industry average on research and development in new software. Similarly, USG follows a strategy of internal development that is complemented by external acquisitions. The emphasis on innovation and research and development is important to maintain a long-term competitive advantage in the firms' markets. Not all businesses were high technology and therefore did not require significant investment in R&D; but innovation is typically considered important in all industries to maintain market leadership and a competitive advantage. For example, Fred Meyer continued to invest in developing new stores and modernizing its existing stores. The modernization of stores might be equated to process innovation in manufacturing firms. Therefore, these firms have been able to avoid the problems described by Hitt et al. (1990,1991a, 1996). Focus on core business(es). At least seven of the acquiring firms were able to maintain a focus on their core business(es) and/or use the acquired firm resources to leverage the core business(es). The use of acquired firm resources to leverage the acquiring firm's core business facilitates the achievement of positive synergy. Several of the firms bought active competitors or businesses in the same industry but operating in different geographical regions. For example. Dairy Mart's acquisition of CONNA was a horizontal acquisition that allowed a significant geographic expansion of the markets in which Dairy Mart operated. Similarly, the Fred Meyer acquisition of Grand Central offered it access to 31 stores in five different states, representing a 50% expansion in the number of its retail outlets. After the acquisition, Fred Meyer was the seventh largest discount merchandiser in the USA and was operating in two new markets, Idaho and Utah. The horizontal acquisition of UCCEL provided Computer Associates over 50% of the information security market. The acquisitions of Beech Aircraft by Raytheon and Cessna Aircraft by General Dynamics both showed a strong emphasis

102 on the core business of the acquiring firms. In other cases, parts of the acquired firm were used to leverage core businesses, such as Ouaker's Pet Foods Division with the integration of Gaines Pet Foods from Anderson Clayton. In fact, the acquisition provided Ouaker Oats new access to and domination of specific dog food market segments. Furthermore, the $172 million of cash and marketable securities and other liquid resources in pension assets provided considerable liquidity for Ouaker Oats to invest in its core businesses. In summary, the continued focus on the acquiring firm's core business(es) and/or use of acquired firm resources to leverage the core business(es) helps the firm to maintain its strengths and hold or gain a long-term competitive advantage.

M. Hitt, J. Harrison, R. D. Ireland and A. Best

debt without incurring substantial problems. Of course, this attribute would make financing (either debt or equity) for the acquisition easier to obtain and less costly. If significant cash was on hand, less extemal financing would be necessary and, if the firm had a favourable debt position, it would be much easier to obtain more debt financing, often at a lower interest rate. An example of the value of financial slack is shown by the Unilever acquisition of CheseboroughPonds. Unilever had $1.5 billion in cash and obtained a bank credit line of up to $3 billion in order to purchase Cheseborough-Ponds. While the acquisition required $3.7 billion, and thus $2.2 biihon was financed with debt, Unilever reduced its debt thereafter by selling some of Cheseborough-Ponds' non-related businesses. AnCareful selection of acquisition targets. In some other example is provided in the Allied acquisition of Signal Companies. As noted earlier. Signal cases, it was clear that the acquiring firm had enCompanies had significant cash on hand, particugaged in a careful and deliberate process of analarly after its acquisition of Wheelabrator ($500 lysing and selecting the target firm. Furthermore, million) and a low debt-to-equity ratio of 25%. the acquisition negotiations were sometimes Therefore, Signal had considerable slack when lengthy but skilfully conducted. For example, the acquired by Allied. Ouaker Oats acquisition of Anderson Clayton required almost one full year to complete. GenPotential outcomes of each of the significant eral Dynamics entered into an agreement for a attributes found in our study are highlighted in joint technology programme with Cessna prior Table 4. to the acquisition. The SmithKline acquisition of Beckman Instruments entailed a careful analysis Attributes of unsuccessful acquisitions by SmithKline because Beckman represented its intended core business (as opposed to its current Large or extraordinary debt. Most (11) of the core business). Analysts were initially sceptical unsuccessful acquisitions compiled large, and for about this acquisition because they could not some, extraordinary debt. For example, Ecolab, identify the positive synergies between pharmain its purchase of Chemlawn, acquired an extra ceuticals and diagnostic equipment. However, $500 000 in debt, an increase of 265% over its the emphasis on biotechnology in Beckman previous total debt. After the acquisition, Ecolab Instruments and the intent by SmithKline to had a 2.13 debt-to-equity ratio. Similarly, Kratos make that a core business offered an excellent had to borrow $49 million to finance its acquisicomplementarity. tion of Keuffel & Esser, increasing its total debt to $72 million. The $49 million was borrowed at a Careful and deliberate selection of target firms 17.75% interest rate (1% above the then-current and conduct of negotiations allows the acquisition prime rate). As such, its annual interest payment of firms with the strongest complementarities and alone was greater than the combined annual reduces the probability of paying a premium, a net income of the two companies. Eventually, common problem noted earlier. Kratos had to delay installment payments on its Financial slack. The final characteristic identi- debt because of inadequate cash flow. fied in several (five) of the successful acquisitions Other examples include US Steel's $3 billion of was the existence of a significant amount of findebt used to finance its acquisition of Marathon ancial slack. This slack was commonly in the form Oil. Afterwards, its total debt reached 52% of of large amounts of available cash or a highly capitalization and its debt rating was lowered favourable debt position, which would allow the twice by Standard and Poors within a nine-month acquiring firm to assume significant amounts of period. Similarly, Kleer-Vu's total debt-to-equity

Attributes of Successful and Unsuccessful Acquisitions of US Firms
Table 4. Effects of successful and unsuccessful acquisition attributes Successful acquisition attributes Attribute 1. Acquired firm has assets and/or resources that are complementary to the acquiring firm 2. Friendly acquisition 3. Merged firm maintains low-to-moderate debt position 4. Experience with change and skills of flexibility and adaptation 5. Sustained and consistent emphasis on R&D and innovation 6. Focus on core business and use of acquired firm resources to leverage core business 7. Careful and deliberate selection of target firm and conduct of negotiations 8. Financial slack (cash and/or favourable debt position) Effect

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High probability of positive synergy and competitive advantage Faster and more effective integration; possibly lower premiums Lower financing costs, lower risk (e.g. of bankruptcy and avoids tradeoffs associated with high debt) Faster and more effective integration; facilities achievement of synergy Maintain long-term competitive advantage in markets Maintain strengths, and long-term competitive advantage; achievement of synergy Acquire firms with strongest complementarities and avoid overpayment Financing (debt or equity) easier to obtain and less costly

Unsuccessful acquisition attributes Attribute 1. Large or extraordinary debt 2. Inadequate target evaluation 3. Ethical concerns and/or opportunism 4. Changes in the top management team and/or structure 5. Multiple acquisitions and/or lack of control 6. Diversification Effect Higher financing costs, higher risk (e.g. bankruptcy) and probability of having to make tradeoffs with long-term investments Pay premium price, and may take on higher risks, along with adding a business that lacks potential to provide positive synergy Inappropriate acquisition and/or negative effects on firm reputation Loss (or lack) of strategic leadership, chaotic conditions within the firm Inability to focus managerial time and energy to select and negotiate acquisition or achieve synergy, ineffective governance Lack of managerial knowledge of business, loss of strategic control

ratio approached 2.0 after its acquisition of Nestle-Lemur. All four firms mentioned above had substantial net losses after their acquisitions were completed, due at least in part to the significant debt costs. Even in those firms that did not experience net losses, debt costs produced significant reductions in net income and reduced their flexibility to make long-term investments and take advantage of acquired assets. Inadequate target evaluation. Inadequate evaluation of the target firm by the acquiring firm was identified in most of the unsuccessful acquisitions. In some cases, the lack of evaluation could be attributed to managerial hubris, overconfidence in their own abilities to effectively manage the assets purchased (Roll, 1986). It is likely that this is the case in Datapoint's purchase of Inforex. The year before the acquisition, Inforex filed for Chapter

11 bankruptcy, because it could not meet its semiannual debt payment. Not surprisingly, Datapoint suffered a huge reduction in net income (a decrease of 95%) in the second year after purchasing Inforex. While the managers blamed the reduction on the recession, total revenues were higher than in the previous year. Thus, the problem was an inability to control costs. Lee Iaccoca, Chrysler's CEO at the time, described the acquisition of AMC as similar 'to swallowing a whale'. American Motors was in the same industry and Chrysler's managers should have well understood its former competitor. Chrysler's overall productivity suffered after the acquisition and it encountered formidable production, labour and organizational problems with AMC. Additionally, it had significant production overcapacity after the purchase. While Chrysler tried to turn around the failing fortunes

104 of AMC's cars, it eventually ended the production of many AMC product lines. Interestingly, AMC's problems were well known. It had a generally poor image with customers (less than 1% share of the US car market in 1986), outmoded and unprofitable manufacturing plants and negative working capital in 1986. Furthermore, Chrysler acquired AMC when the consumer market for automobiles was soft, forcing it to close plants and lay off workers.'* In other cases, there was lack of attention to important details, possibly due to hubris or worse, incompetence. For example, Chemlawn was loosely managed (lack of controls) and overextended prior to the acquisition. Following the acquisition, Ecolab managers tried to rapidly expand Chemlawn's business but encountered management inefficiencies and low worker productivity in Chemlawn. As a result, many Chemlawn managers were fired. Ecolab's CEO admitted that it encountered more trouble with Chemlawn than was expected. An extreme case of inadequate analysis of the target firm and inattention to detail occurred in the Corvus acquisition of Onyx IMI. Corvus bought Onyx in 1985 despite the fact that Onyx lost its major contract with IBM the year before and continued to experience technical problems with its disk drives. Corvus experienced a significant loss in sales and net losses after the purchase of Onyx. As a result, it sold the Onyx microcomputer line, inventory, trade name and related technology for $2 million only seven months after acquiring it for $47 million.
" Long after the event, some analysts have argued that Chrysler's acquisition of AMC was only for the purpose of obtaining the popular Jeep division. However, the facts belie such a conclusion. For example, if true, it is unclear why Chrysler did not immediately sell off (or close) all of the other assets (similar to Quaker Oats' actions with Anderson Clayton assets). Rather, Chrysler executives tried to operate many of the AMC plants and market several of AMC's other product lines. Alternatively, Chrysler could have sought to purchase only the Jeep division. Given the financial straits of AMC and its owner Renault, at the time, such a purchase probably could have been negotiated. Furthermore, there was no suggestion in any of the published accounts before or after the acquisition that Chrysler was focusing on the Jeep division's assets. While the performance of the Jeep product line has since been a positive outcome, the data do not support a conclusion that the Jeep division was the only or even the primary target in Chrysler's acquisition of AMC.

M. Hitt, J. Harrison, R. D. Ireland and A. Best

Ethical concerns/opportunism. In 10 of the 12 acquisitions studied, ethical concerns and/or opportunism were observed. Sometimes, these ethical concerns or opportunistic behaviour related directly to the acquisition and thus may have had effects on its outcome. In other cases, the concerns and/ opportunism were observed in one or more of the firms involved in the acquisition, but were not related directly to acquisition activities. Such behaviour may affect the reputation of the firms involved and thus could have, at least, an indirect effect on the success or failure of the acquisition. Also, the high reported rate of unethical practices in the set of unsuccessful acquisitions may suggest that other corrupt practices went unreported but still had a negative impact on performance. Prior to and shortly after the HBO acquisition of Amherst Associates, a number of opportunistic actions were taken by HBO managers. For example, in an attempt to avoid a hostile takeover, HBO managers began to implement a plan to recapitalize, but encountered resistance from a lawsuit filed by stockholders. Thereafter, HBO managers adopted a poison pill to discourage hostile takeovers. HBO managers also sold a portion of the firm's contracts for immediate revenue and profits in order to maintain projected growth rates. Finally, immediately before an announced downturn in earnings, the HBO chairman sold 500 000 shares of stock back to the firm at $23 per share, close to the highest historical price of the firm's stock. An example of opportunism related more directly to the acquisition occurred in the case of the Corvus Systems acquisition of Onyx. The buyout was initiated by Carl Berg, who was the chairman of and a major stockholder in Onyx IMI. He also served as a director of and held a major ownership position in Corvus Systems. Onyx's sales revenue fell by 32% in the year immediately preceding the acquisition. Furthermore, Corvus sold Onyx's microcomputer product line at a tremendous loss only seven months after buying the firm. After major sales reductions in the year following the acquisition, major disputes arose between top executives in Corvus Systems and Mr Berg. Another apparent ethical concern was observed in Cooper Laboratories' acquisition of Cavitron. In 1979, Cavitron fought Cooper's attempt to take over the firm. At that time, an agreement was reached between Cavitron and Cooper executives

Attributes of Successful and Unsuccessful Acquisitions of US Firms that Cooper would not purchase more than 20.5% of Cavitron stock. However, Cooper reneged on its original agreement and in 1980, Cooper owned approximately 33% of Cavitron stock. In other examples, the opportunism/ethically questionable behaviours may not have been involved directly in the acquisition. For example, Datapoint directors, officers and auditors were named in a lawsuit that claimed they violated Federal Securities and other laws when officers and directors sold their stock-holdings prior to the release of negative news about the company (which would negatively affect the stock price). Also, to ensure achievement of sales targets, marketing executives shipped false orders to record revenue in a specific quarter and show the growth in earnings and revenues continued as projected by top management. In September 1982, shareholders filed a lawsuit claiming that company officers had misrepresented the firm as a profitable, growing company and that these indiscretions, when reported, caused the stock price to fall precipitously. Furthermore, Inforex, the firm acquired by Datapoint, was investigated by the Securities and Exchange Commission (SEC) regarding potential concerns about reporting procedures, record-keeping actions, internal controls and payments to foreign governments. Other actions suggesting ethical concerns were evident in Ashland Oil Company in which managers made illegal contributions to the US Presidential Campaign, were accused of illegal bid rigging for government contracts, and paid bribes to obtain oil from the Middle East. Likewise, US Steel was cited by the SEC because it failed to make adequate disclosure to investors of the costs dealing with federal, state and local environmental regulations. This citation suggested that the firm may have failed to disclose up to $2 billion of such costs. In addition, the US Justice Department sued US Steel for violating federal air pollution regulations. The firm US Steel bought, Marathon Oil, was indicted for fraudulently obtaining oil and gas leases and was charged by the Energy Department with deliberately overcharging customers. Top management team and/or structure changes. In nine of the acquisitions studied, major changes in the top management team and/or the structure of the firm occurred. For example, Corvus Systems had three different CEOs in the three years

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following its acquisition of Onyx IMI. The president of Kleer-Vu resigned the year after the firm acquired Nestle-Lemur. In the year following HBO's acquisition of Amherst Associates, its CEO, who had been on the job less than one year, was replaced. Similarly, the president of Kratos resigned two years after the purchase of Keuffel & Esser. In addition, Datapoint fired five executives from marketing and operations when the false shipments were discovered shortly after the Inforex acquisition. Thus, little continuity of leadership existed in these firms. Achieving effective integration of newlymerged firms requires strong leadership and oversight. The loss of key top executives shortly after completing an acquisition may interrupt such leadership and control. It also likely indicates conflict in the governance of the firm. Other firms made major changes in their structures. Chrysler, for example, implemented a holding company structure overseeing four autonomous divisions in 1985, two years prior to its acquisition of American Motors. This structure was designed to facilitate the implementation of its acquisition and diversification strategy. However, three years after the acquisition of AMC, Chrysler restructured the firm, abandoning the holding company structure, declaring it a mistake. In addition, Datapoint restructured into an Mform structure organized around functions during the same year it bought Inforex. Alternatively, Ashland Oil reorganized into a holding company structure shortly after its purchase of US Filter. Multiple acquisition/lack of control. HBO bought Mediflex Systems Corporation and three other firms shortly after acquiring Amherst Associates. Likewise, Ashland Oil bought a stake in NLT Corporation and Integran, a life insurance company, in close proximity to the time period in which it acquired US Filter. Shortly before Chrysler acquired AMC it acquired Gulf Stream Aerospace Corporation and Electro Space Systems, Inc. Both Cooper Industries and Cooper Laboratories were active acquirers before and after their acquisitions included in this study. Mallinckrodt was an active acquirer before and after it was bought by Avon. Within a short time after it was acquired by Avon, Mallinckrodt bought a speciality chemicals company. Making multiple acquisitions within a short time period does not allow top management of the acquiring

106 firm to focus its energies on the necessary evaluations of and negotiations with any one target firm, nor on the activities required to effectively integrate the acquired firm into the acquiring firm. For example. Cooper Industries acknowledged problems in integrating recent acquisitions, with particular emphasis on Crouse-Hinds, and suspended its acquisition programme for a period of time in hopes of improving the integration (Stuart and Collis, 1991b). Lack of control is evidenced in the case of Datapoint. In the year following its acquisition of Inforex, its net profits fell from almost $49 million to less than $3 million. While the firm claimed that the drop in earnings was due to a recession, as noted earlier, total revenues were higher than the previous year. Therefore, costs had to be even higher, evidencing control problems after the acquisition. Diversification. Finally, six out of the 12 unsuccessful acquisitions studied entailed some form of diversification. In some cases, the firm acquired was unrelated to the acquiring firm's core business, such as in the US Steel acquisition of Marathon Oil. Similarly, there was little relatedness between the core business of HBO and Amherst and Associates, a health care consulting firm, and between the core business of Ashland Oil and US Filter, a manufacturer of pollution control equipment. Cooper Industries operates more as a conglomerate firm buying and selling unrelated businesses. Thus, its purchase of Crouse Hinds, a diversified manufacturer of electrical products, fitted its overall portfolio, because it provided new products and markets to Cooper Industries. Alternatively, the Ecolab purchase of Chemlawn was related. However, the goal of the acquisition was to provide diversification for Ecolab into residential services, because it only served institutional customers prior to this acquisition. Thus, while loosely related to Ecolab, the acquisition of Chemlawn represented a diversification move. Similarly, Avon's acquisition of Mallinckrodt was a partially related move, but Mallinckrodt was a hospital supply and chemical company, and thus its main businesses were only related to other businesses Avon bought within the health care field. As such, Mallinckrodt represented one piece of a broader diversification strategy on Avon's part.

M. Hitt, J. Harrison, R. D. Ireland and A. Best While Chrysler's acquisition of AMC was a horizontal move, its other acquisitions in a similar time period represented implementation of a diversification strategy. Therefore, in these six cases, all acquisitions were a part of the firms' overall diversification strategy. Potential outcomes of each of the significant attributes found in our study are highlighted in Table 4.

Discussion
The results of this study suggest that no one theory (offered previously) can explain fully the success of acquisitions or the lack thereof. The phenomenon is more complex than past theoretical reasoning suggests. For example, no less than three primary attributes were found important in each case in the set of less successful acquisitions. No less than four attributes for the set of successful acquisitions were found for any particular acquisition. As a result, the research suggests that pattems or configurations of attributes/variables may help explain the degree of success of acquisitions (Meyer, Tsui and Hinings, 1993). Below we discuss some of the major findings and their support or lack of support for prior theoretical arguments regarding acquisitions. Relatedness/resource complementarities One of the most studied topics in strategic management has been the importance of relatedness (of products/markets) for firm performance. While there have been compelling arguments for the importance of product/market relatedness among a firm's business, the research has been inconclusive (i.e. Hoskisson and Hitt, 1990). While the results of our research provide some support for the performance effects of relatedness/resource complementarities, they also provide information that may help understand the previous conflicting findings. All of the acquisitions in the successful group had assets and/or resources that were complementary to the acquiring firm and most were consistent with its strategic focus. Significantly related acquisitions can make it easier for the merged firms to identify complementarities and exploit positive synergy. Even conglomerate firms (highly unrelated businesses) were able to make successful acquisitions, as long as the target firm was related to some of the acquiring firm's

Attributes of Successful and Unsuccessful Acquisitions of US Firms businesses. The key to success appears to be the ability to identify complementarities and take specific actions to achieve positive synergy (noticeably absent in the unsuccessful acquisitions). Thus, resource complementarities are of greater importance than the product/market relatedness of a specific acquisition. These results provide support for the resource-based view of the firm. In particular, the findings of the importance of resource complementarities and focus on a core business suggest that the successful firms were able to achieve economies of scale, economies of scope and/or market power. While some of the unsuccessful acquisitions were also closely related to the acquiring firms, there was not a consistent pattern of relatedness in this group. Six of the 12 acquisitions involved significant diversification. However, even in the cases involving acquisition of related firms, the acquiring firm was unable to achieve or develop positive synergy between the two firms' assets/ resources. Therefore, product/market relatedness alone did not distinguish clearly between the successful and unsuccessful acquisitions in this study. As a whole, this research suggests that total diversification of the firm is less important than the resource complementarity between the two merging firms. Relatedness of products/markets does not necessarily imply that the two firms have complementary resources. For example, resources do not have to be similar to be complementary. Harrison et al. (1991) found that firms with different, but complementary resources, were better able to achieve synergy than those with similar resources. TTiis may help explain why researchers have been unable to find consistent support for the relatedness hypothesis in past research (e.g. Chatterjee, 1986; Lubatkin, 1987; Seth, 1990; Wansley, Lane and Yang, 1983). Furthermore, this past research is dominated by large sample studies where the researchers determined potential resource complementarities a priori or used product relatedness as a proxy for resource complementarity. Moreover, because it is difficult to measure intangible resources, most of these studies focused on only tangible resources. Our research suggests the importance of resource complementarities for successful acquisitions, leading to the following proposition: Proposition 1. Resource complementarity, in combination with other attributes, contributes to acquisition success.

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Debt position. Acquisitions are often associated with increasing levels of debt, especially in the short term (Hitt et al, 1991b). Debt was the most consistent determinant of whether an aquisition would be successful or not. Ten of the 12 successful acquisitions were associated with low-tomoderate debt, while large or extraordinary debt was linked to 11 of the unsuccessful acquisitions. Debt servicing costs can reduce earnings and divert financial resources from innovative activities (Hitt et ai, 1990). The increased financial risk associated with debt may also make managers more risk averse and less willing to invest in R&D due to its uncertain payoff (Baysinger and Hoskisson, 1989; Smith and Warner, 1979). High or extraordinary debt increases the risk of bankruptcy (Hitt and Smart, 1994). While debt can be a positive force in the development of the firm (Modigliani and Miller, 1958), low-to-moderate debt allows managers more strategic flexibility flexibility that is necessary to operate effectively in a dynamic and hyper-competitive environment (D'Aveni, 1994). Thus, the results suggest that firms should be careful in the amount of debt used to finance an acquisition. Our findings concerning debt are in contrast to the arguments by Jensen (;i986, 1989) that debt may be necessary as a disciplinary force for managers. Also, we observed some forms of managerial opportunism in firms with high debt loads suggesting that debt may not always prevent such opportunitism. Some arguments (e.g. Jensen, 1986,1988) seem to ignore (or attempt to explain away) the trade-off costs required with the use of high leverage. Based on the results of this study, the second proposition is as follows: Proposition 2. Low-to-moderate debt levels (combined with other attributes) increase the likelihood that financial performance and innovative activity will increase subsequent to an acquisition, while high debt levels (combined with other attributes) lead to reductions in financial performance and innovative activity. Experience with change. Large-scale changes were discovered in both sets of acquisitions. However, the nature of change was substantially different between the groups. Eight of our 12 high-performing acquisitions involved at least one company, and often both firms, that had recent

108 experience with significant corporate changes, most often due to other acquisitions. Companies that have recent experience with acquisitions are already in a fluid state and therefore more easily adaptable to the changes required by the new acquisition. Lewin (1936) suggested that behavioural changes are facilitated by a process of 'unfreezing', 'change', and 'refreezing'. At the organizational level, unfreezing involves overcoming structural inertia that results from forces favouring the status quo. These forces can include existing systems, structures, processes, culture, sunk costs and internal politics, factors that provide stability in organizations. However, if an organization has completed an acquisition recently or been involved in some other form of restructuring, its systems, structures, processes, culture, sunk costs and internal politics should be in a fluid state. Thus, the organization is likely to be unfrozen or flexible. Because an acquisition requires substantial change in both firms (Jemison and Sitkin, 1986), flexibility should facilitate post-acquisition integration. At a minimum, acquisitions require changes to information systems, compensation systems, planning systems, control systems and reporting structures. Organizations that have experience with these types of changes are in a better position to create a smooth transition leading to greater synergy. Additionally, firms with prior acquisition experience have a better understanding of the target selection process, are more knowledgeable regarding negotiations and can better integrate acquired firms into their operations. Experience in the change process allows them to anticipate and prevent or overcome resistance to change from target-firm managers (and perhaps their own middle and lower-level managers and professionals). It may even be possible for organizations to develop distinctive competencies in their abilities to select, purchase and integrate other companies (Haspeslagh and Jemison, 1991a; Hitt and Ireland, 1985,1986). The key for change experience to contribute to more effective acquisitions is organizational learning. In other words, firms that have significant experience with large-scale change must learn from that change and apply that learning to the process of selecting and/or integrating the acquisition after it is completed as recommended by Haspeslagh and Jemison (1991a).

M Hitt, J. Harrison, R. D. Ireland and A. Best Pennings, Barkema and Douma (1994) argue that, in general, acquisitions compared to internal ventures (innovation) often prevent a firm from developing proprietary skills to endow it with a competitive advantage. While learning from acquisitions may be difficult and may require concerted effort, our results show that some firms overcome this barrier and learn from their experience thereby facilitating better management of future acquisitions. Alternatively, Kusewitt (1985) observed a negative relationship between the number of acquisitions in which an acquiring firm had recently engaged and its financial performance. He attributed this effect to 'corporate indigestion stemming from acquisition fever' (p. 159). The effects described by Kusewitt are consistent with our findings in the unsuccessful set of acquisitions. Nine of the 12 acquisitions were associated with multiple acquisitions by one or both firms. In fact, several of the acquisitions in this group were carried out simultaneously or within a year of another major aquisition. The result was chaos, as opposed to systematic implementation. We attribute these differences to organizational learning. The successful acquiring firms learned from their previous acquisitions and applied the enhanced knowledge to make an effective new acquisition (e.g. special actions to identify and achieve positive synergy). Seven of the nine acquisitions in this chaotic sub-group were also subjected to major changes in structure or the top management team during the same time period, contributing to the loss of control. Datta (1991) discovered that differences in top management styles between acquiring and target firms had a negative effect on performance. Top management team transitions are likely to exacerbate this effect. As a result, we can see that experience with change is positive, as long as the organization learns from past change activities and controls the processes associated with the acquisition. However, too much change, too fast, can cause the acquiring firm to lose control of these processes. The following proposition summarizes these arguments: Proposition 3. Recent experience with acquisitions or other large-scale changes by one or both acquisition partners (in combination with other attributes) can increase the likelihood of acquisition success, if effective organizational

Attributes of Successful and Unsuccessful Acquisitions of US Firms leaming is achieved. Without such learning, chaotic conditions limit control over implementation processes, leading to poor financial performance and a reduction in innovative activity. Acquisition selection and negotiation processes. Five of the acquisitions in the successful group were completed only after the target was chosen carefully. However, nearly all (11) of the unsuccessful acquisitions were associated with inadequate target evaluation and planning for the acquisition. In the unsuccessful group, inadequate evaluation and planning occurred for a variety of reasons, including overconfidence in the ability to manage purchased assets effectively (managerial hubris), ignoring obvious problems in the target firm. Thus, the results provide support for Roll's (1986) hypothesis that ineffectiveness in some acquisitions is due to the hubris of acquiring firm managers. Often, the acquiring firm paid substantial premiums for the acquired firm. All of the problems were related to a lack of thorough analysis of the target firm and the processes needed to acquire and integrate it into the new parent. The white knights in the unsuccessful sample, in particular, seemed determined to make the acquisitions despite having to pay extremely high premiums and other obvious barriers. Also, many of the unsuccessful acquisitions were completed in a short period of time, disallowing appropriate analysis and negotiations. These results provide strong support for Haspeslagh and Jemison's (1991a) suggestion of the importance of a quality pre-acquisition decision process. Consequently, the following proposition is offered: Proposition 4. Deliberate and systematic acquisition planning processes (in combination with other attributes) can facilitate the purchase of an acceptable target with terms that will not adversely affect and may even contribute to high financial performance and increased innovation. Configurations of attributes Perhaps the most important finding from this study is that no single attribute alone could explain the acquisitions success or lack thereof. This becomes even more important because many

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of these attributes represented different theoretical explanations for the success or failure of an acquisitive strategy. Attribute configurations for successful acquisitions. Six attributes were the most significant in successful acquisitions: resource complementarities, friendliness of the process, low-tomoderate debt, change experience, emphasis on innovation and focus on core business. All of the successful acquisitions were associated with both resource complementarities and friendly negotiations. Most of the acquisitions exhibited the combination of low-to-moderate debt and change experience as well. Those acquisitions without the latter two attributes exhibited a combination of a focus on core business and an emphasis on innovation. Thus, all of the acquisitions in the successful group exhibited some combination of four of the aforementioned six attributes. A friendly negotiation process should facilitate the integration between the two firms after the acquisition is completed; Haspeslagh and Jemison (1991a) have argued the importance of the integration process to the success of acquisitions. Alternatively, the fact that none of the acquisitions in the successful set entailed a hostile process provides little support for the market for corporate control arguments popularized by Jensen (1988) and others. Friendliness between the two firms may facilitate the creation and exploitation of synergy, when resource complementarities exist. Unfriendly negotiations can lead to higher premiums, which reduce future financial returns. In addition, friendliness during the negotiation process can increase the probability that the cultures and systems of the merging firms will be successfully combined, thus increasing the likelihood that synergies will be realized (Harrison, O'Neill and Hoskisson, 1991). If a target firm's managers are opposed to the acquisition, they are not likely to be cooperative during postacquisition integration. The emphasis on the innovation attribute supports arguments by Hitt et al. (1990) and Franko (1989) suggesting the importance of innovation for strategic competitiveness and firm performance. Our results also suggest that firms can remain innovative even though they follow an acquisition strategy, in contrast to the arguments of Hitt et al (1990) and Hitt et al. (1991b). Earlier, we suggested the importance of focusing on a

no firm's core business, which supports much of the recent literature in strategy suggesting that top executives can more effectively manage firms that remain focused and do not overdiversify (e.g. Hoskisson and Hitt, 1994). Thus, our research suggests that successful acquisitions usually entail resource complementarities and a friendly, non-hostile process. In addition, they usually exhibit other attributes such as low-to-moderate debt and change experience or focus on core business and an emphasis on innovation. Many of the acquisitions exhibited configurations of more than four attributes. Thus, the results lead to the following proposition: Proposition 5. Optimal synergy is created and highest performance is achieved when acquisitions entail resource complementarities, friendly, non-hostile negotiations and a combination of low-to-moderate debt and change experience or focus on core business and an emphasis on innovation. Attribute configurations in unsuccessful acquisitions. The dominant attributes of the unsuccessful acquisitions included large or extraordinary debt, inadequate target evaluation, ethical concerns/ opportunism and top management team and/or structure changes. In fact, 11 of the 12 acquisitions in this set entailed combinations of at least three of these four attributes. Clearly, where managerial hubris produces inadequate evaluation of potential acquisition targets, executives are likely to believe that they can successfully manage their firms in spite of high debt levels and the associated servicing costs. Furthermore, those who exhibit managerial arrogance are also more likely to engage in opportunistic or unethical behaviour. Such individuals may believe they can conceal behaviours that are inconsistent with societal values, laws or regulations. Alternatively, they may underestimate the potential severity of negative consequences resulting from such behaviours. Organizations with poor social performance are often involved in court battles which can drain resources and divert funds from productive uses (e.g. R&D, capital equipment). Furthermore, executives may be involved personally in the legal proceedings, thus turning their attention from important activities such as successful integration of an acquisition. In some of the cases studied, executives had to spend inordinate amounts of

M. Hitt, J. Harrison, R. D. Ireland and A. Best

time dealing with court battles and/or problems created by inappropriate behaviour of other managers. Thus, such problems can produce lower performance of the combined firm. Nine of the ten unsuccessful acquisitions that experienced top management team change and/ or major structural changes also exhibited poor social performance. In some instances, top management team changes could be linked to unethical actions. In these instances, top executives were forced out for, among other reasons, their involvement in questionable activities. Top managers (especially the CEO) are a major source of the organization's ethical values. When top managers are replaced, subordinates experience confusion conceming the ground rules of acceptable behaviour (Pastin, 1986). At these times, organizations are particularly susceptible to ethical problems. Dramatic changes to organizational structure are likely to result in the same type of confusion, because they entail revisions in reporting relationships and lines of authority and supervision. Consequently, it is not surprising that changes in the top management team or major changes to structure are associated with unethical actions, especially when combined with an acquisition, another source disruption. These arguments lead to the following proposition: Proposition 6. Configurations of large or extraordinary debt, inadequate target evaluation, ethical concerns/opportunism and top management team and/or structure changes are likely to lead to poorer financial performance and less innovative activity after the acquisition is completed. Limitations While the approach used has a number of advantages, it also has some limitations. The use of secondary data collected and reported by others (e.g. journalists) opens the data to potential biases because they are based on the perceptions and interpretations of people over whom the researchers have no control. This limitation is partially offset because many different sources were used, allowing the researchers to triangulate information. Additionally, the approach used has the potential for injecting researcher bias because the researchers gather, analyse and interpret the

Attributes of Successful and Unsuccessful Acquisitions of US Firms data with the case method. However, as described earlier, care was taken to limit researcher bias. Certainly, other measures of acquisition success (or the lack thereof) could have been used. No combination of measures can fully capture such a complex phenomenon. Furthermore, R&D investments (one of the variables used as a success criterion) have a long-term effect, and will have an ex post effect on ex ante ROA. Of course, ROA may also have an effect on ex post R&D. Most variables related to success, however, are likely to be reciprocally interdependent. These two variables were chosen over other possible success criteria (e.g. liquidity, productivity measures) because of their prominence in recent empirical research on acquisitions. Additionally, the focus on outliers could limit generalizability. Using outhers helps ensure that the attributes discovered differentiate successful and unsuccessful acquisitions. However, further research will be needed to discover if the attributes of outliers generalize to the larger universe of acquisitions. Finally, while debt effects are considered largely as exogenous in this research, they also are endogenous. The level of debt is considered as an outcome variable (which contributes to firm performance - high debt costs reduce R&D investments and ROA) but it also affects slack resources. The case research design does not allow disentangling the variables such as debt that can be both endogenous and exogenous. Implications and conclusions While there are potential limitations of the method used in this study, its richness and depth provide many benefits that we believe outweigh its limitations. As such, this study has implications for theory development in the strategic management field. First, it represents a non-conventional technique for developing strategic management theory. Case studies have long been a part of management research. However, case research has typically involved either one or a very small number of cases (Larsson, 1993) and a single researcher using a rather informal method. The multiple case, multiple rater, systematic case method used here has the potential to facilitate the development of new theory in the strategic management field. Additionally, the use of an outher approach facilitated our ability to differentiate

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the attributes of successful and less successful acquisitions. As such, this approach holds promise to facilitate understanding of complex phenomena not well explained using averages across large samples. Second, some of the widely referenced theories concerning acquisitions were confirmed. For example, resource complementarities, combined with a friendly courtship, were found in the high performing acquisitions. However, the inability of relatedness, alone, to explain performance provides further understanding of why the relatedness hypothesis has not received consistent support. Clear resource complementarities must exist and be exploited. In some cases, resource complementarities cannot be identified by product relatedness (used in much previous research), as in the SmithKline acquisition of Beckman Instruments. In addition to the support for a resource-based view of acquisitions, the work of Haspeslagh and Jemison (1991a, 1991b) received considerable support from this study. Three of their four original recommendations (they referred to them as managerial challenges) regarding acquisitions received support from this study Haspeslagh and Jemison emphasize the importance of the acquisition process in acquisition success. The recommendations receiving support included following a quality pre-acquisition decision-making process, effectively integrating the acquired firm into the existing business and fostering learning from the acquisition. Thus, our research suggests that the acquisition process does, indeed, have an important effect on post-acquisition firm performance. This study also provided strong evidence concerning the important role of debt in acquisitions. Basically, our findings suggest that debt's disciplinary properties were unnecessary in these firms to achieve strong performance and high value thereby raising questions about the significance of Jensen's (1989) arguments on the need for debt to provide high value to shareholders. It is also of interest that managerial opportunism was evidenced in some firms with high debt, thereby questioning debt's disciplinary properties. The fact that no hostile acquisitions were found among our sample of successful acquisitions is at odds with the arguments for the efficiency of the market for corporate control and its disciplinary role. In the 1980s, it was argued that hostile takeover bids represented the natural forces in

112 the market for corporate control to acquire undervalued assets (because of ineffective management teams' and firms' inefficiencies) (i.e. Hermann and Lowenstein, 1988; Jensen and Ruback, 1983; Jensen, 1986). These results are partially supported by Walsh and Kosnik (1993) who showed that the disciplinary effect of the market for corporate control may exist only among target firms and competitors that had sustained histories of poor performance. In fact, Walsh and Kosnik (1993) found that almost 50% of the cases involving the most active hostile takeover artists in the 1980s were focused on target firms performing above their industry's average. Furthermore, the problems in attempting to achieve integration of the two firms after an unfriendly takeover are obviously more significant than suggested previously. The findings by Davis and Stout (1992) may require some reinterpretation based on the results of our study. They found that firms with high debt were not attractive takeover candidates but those with low debt were more likely to experience hostile takeover attempts because of poor management. Our research suggests a different interpretation. Firms with high slack and low debt are likely to be more attractive acquisition targets than those with high debt because of the debt servicing costs and the ability to obtain more capital to finance the acquisition. Furthermore, our results suggest that firms with low debt likely had effective management and firms with high debt often had ineffective management. An interesting finding of this study was that even highly diversified firms were able to complete successful acquisitions under certain conditions. Also, successful and unsuccessful acquisitions do not appear confined to certain industries. In both cases, past research could be interpreted to suggest otherwise. Therefore, this study has partially confirmed some prior research regarding the importance of relatedness and friendliness. However, in other cases, the results question commonly accepted theoretical notions. Several variables identified in this study are worthy of further investigation, including experience with change, emphasis on innovation, the existence or absence of slack, managerial hubris, ethical concerns and changes in the top management team. However, it may be that the configuration of attributes is more important than any one of the factors considered separately (Meyer

M. Hitt, J. Harrison, R. D. Ireland and A. Best

et al., 1993). In fact, our research strongly supports the notion that success or the lack thereof in acquisitions is likely the result of a configuration of variables rather than any one variable's independent effects. Thus, a more complex view of acquisitions may be necessary to accurately test and understand their success in future research. Thus, our study has confirmed some important prior theoretical arguments and provided evidence of the potential inaccuracy of other theoretical arguments regarding acquisitions. As a result, this research provides a basis for future empirical work on acquisitions. We encourage further empirical work using large samples to examine the propositions stated herein. Our research suggests the importance of examining multiple variables and their potential interaction to explain postacquisition performance. Furthermore, some of the variables identified in our study may require intensive field research (e.g. learning from change experiences, inadequate target evaluations, emphasis on innovation and possibly managerial opportunism). As a result, to understand the complex phenomenon of acquisitions in future empirical work may require both quantitative and qualitative approaches and be longitudinal in nature. Thus, our research suggests the need for complex and challenging research designs to capture a more complete understanding of acquisitions.

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