A Strategic Approach to Implementing Mergers and Acquisitions

Do mergers and acquisitions (M&As) create value and thus enhance the financial performance of acquiring firms? This question has plagued both academics and practitioners for many years. The potential to create value through M&As rests on the premise that a firm can supplement or complement its core skills and resources (i.e., distinctive competencies) through synergistic or value-creating combinations with other firms. Despite the intuitive appeal of this premise, the aggregate empirical evidence on the profitability and the stock market performance of acquiring firms remains equivocal.1 Moreover, practical experience yields numerous examples of both M&A successes and failures.