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Publication: How Industry Lifecycle Sets Boundary Conditions for M&A Integration

Value creation in acquisitions is tightly connected with actions taken during integration. There is no “one size fits all” approach for integration but rather an interdependency of the suitability of integration related decisions with the industry lifecycle.

As firm growth is not generated by resources as such but by the management thereof, environment dynamisms need to be considered for strategic choices. Thereby, the stage of the industry lifecycle sets boundary conditions for management in reaching effective post-acquisition integration and thus long-term growth. 

In this paper, it is argued that M&A integration should not be studied as a self-contained event on an organizational level, but rather by considering the interplay of environmental and organizational forces. Different industry contexts act as boundary conditions determining the value of the degree of integration and the deployed formal and informal coordination mechanisms. Further it is argued that the significance of integration related decisions and measures differ in growing, mature, and declining industries. Empirical evidence is given that growth, maturity, and decline stages are important boundary conditions for M&A integration and that integration related decisions and measures should be employed differently according to the industrial setting.

Data was collected from two surveys. Study 1 was conducted in March and April 2012, while Study 2 was conducted in the same months in 2014. Both samples were constructed from the Zephyr database form the German-speaking part of Europe.

Managerial implications of the study are twofold. First, managers should consider the industry context when planning and incorporating acquisition integration. There is no “perfect” set of managerial actions for integration. Second, the reliance on acquisitions experience in general seems to pay off. However, in declining and growing markets, experience has no beneficial effects, as these beneficial effects can be exploited only in a mature stage of the lifecycle.

In all three stages of the industry lifecycle, M&A are a popular tool for strategic renewal or adaption. To accommodate the different inherent challenges within each stage, integration depth and coordination mechanisms should differ. This paper contributes to the M&A literature by introducing the idea of industry context and shedding light on the dependency of depth of integration and mechanisms on the industry lifecycle. 

Florian Bauer, Mai Anh Dao, Kurt Matzler, Shlomo Y. Tarba