Reflection Paper on M&a: Transaction Stage

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One of the important aspects mentioned in the Weber book was about turnover avoidance. He suggests making agreements with management of the target firm about keeping the turnover level within certain limits. I define this as a very important instrument of making an effective M&A. Retention of key personnel cannot be underestimated for keeping the performance of the seller company at a certain efficiency level. However, such agreements might harmfully affect the integration level between companies and eventually achieving synergy targets. People that are not willing to work under the new management can be urged to stay on board that might result in decreased individual efficiency and destroying the company’s morale.

After initial due diligence, final agreement is signed and then implementation phase takes place. The transaction phase is an important part of the M&A process as bidder has its first interactions with the target company. The right approach and understanding the motives of the opposite party are important as they form trust and foundation for future negotiations. Valentum speaker demonstrated that to persuade owners to sell the company, it is important to know the background of the person, his family situation and social context where he lives. One might refuse to sell the company since he is viewed as “important guy” in his small city. These peculiarities make M&A more art, rather than science with precise formulas to calculate synergy potential.

References:

Yaakov Weber, Shlomo Tarba, Christina Oberg. A Comprehensive Guide to Mergers & Acquisitions: Managing the Critical Success Factors Across Every Stage of the M&A Process, 1st Edition, 2015

MELISSA E. GRAEBNER. CAVEAT VENDITOR: TRUST ASYMMETRIES IN ACQUISITIONS OF ENTREPRENEURIAL FIRMS. Academy of Management Journal, 2009, Vol. 52, No. 3, 435–472.

Michael Hitt, Jeffrey Harrison, R. Duane Ireland‡ and Aleta Best. Attributes of Successful and Unsuccessful Acquisitions of US Firms. British Journal of Management, Vol. 9, 91–114 (1998)

Yaakov Weber, Shlomo Tarba. A model of the influence of culture on integration approaches and international mergers and acquisition performance. Int. Studies of Mgt. & Org., vol. 41, no. 3, Fall 2011, pp. 9–24.