| Research of mergers and acquisitions (M&A) performance has grown rapidly in the last few decades; this is evident by several indicators such as the number of mergers or size of investment. Over more than 30 years of merger research, most studies suggest that mergers fail and that the majority of acquirers lose value. However, the merger performance analysis did not go unquestioned. In the last decade, the approach to merger performance analysis fell under scrutiny; most importantly because a high degree of heterogeneity was noticed in the definition and measurement of performance (Zollo & Singh, 2004). Research also indicates that some performance measurement techniques are subject to critique and that no significant correlation can be found between performance data generated by alternative subjective and objective performance metrics (Schoenberg, 2006).;Although there is little correlation between different performance measures, the vast majority of studies confirm that M&A is not an easy way to maximize shareholder's value. Early research examines the hypothesis that all mergers are traditional value maximizing transactions. Researchers make several explanations for the non-value maximizing behaviour by management. Jensen (1986) suggests existence of an agency problem. Roll (1986) and Hayward and Hambrick (1997) attribute merger failure to management hubris. Other researchers attribute this to gambler's ruin (Wilcox, 1971), managerial learning (Aktas, de Bodt, & Roll, 2009) and myopia.;Angwin (2007) shifts away from the collective wisdom that M&A is a simple process triggered by a financial, strategic or economic reason. His approach calls for a broader multifaceted quantitative as well as qualitative approach that reflects the complex nature of M&A transaction as result of interaction between environmental dynamics, organizational strategies and managerial self-serving motives. Schoenberg (2006) also suggests that employing multiple performance criteria allows us to capture a holistic image of the merger activity and the array of possible, favourable or unfavourable, outcomes. The recent advancements in merger research draw a critical conclusion that motives and performance outcomes are interrelated and that the performance outcome is determined to a large extent by the motivational criteria that triggered the merger transaction in the first place. |
