IDEAS home Printed from https://ideas.repec.org/a/eee/bushor/v66y2023i5p691-706.html
   My bibliography  Save this article

Acquisitions of divested business units: A typology and strategies for success

Author

Listed:
  • McGrath, Patia J.
  • O’Neill, Hugh M.

Abstract

Acquisitions are notoriously difficult to execute successfully. Poor implementation of the postacquisition integration process is a major source of acquisition value destruction. To find new solutions for this vexing problem, we leverage the emerging, triadic view of mergers and acquisitions (M&A) activities, which emphasizes the interconnectedness between sellers, acquirers, and the units that are transferred between them. We apply the triadic lens to acquisitions of divested business units, and we find that a unit’s experiences with its seller before and during divestiture can profoundly shape the unit’s needs and expectations, which, in turn, must be addressed by the acquirer in the integration process. We identify four key mechanisms—status, resource accessibility, trust, and self-sufficiency—that underpin the seller’s impact on the divested unit, and we develop a typology—comprising favored, neglected, shocked, and independent units—that animates the ramifications of the seller’s actions. Then, for each type, we discern strategies for its postacquisition integration execution that are tailored to its distinctive needs, which originate from its experiences with the seller. To make these insights practical and readily implementable, we provide a diagnostic checklist for identifying the four types of divested units and offer an action plan of type-specific strategies for successfully managing them in the postacquisition integration process.

Suggested Citation

  • McGrath, Patia J. & O’Neill, Hugh M., 2023. "Acquisitions of divested business units: A typology and strategies for success," Business Horizons, Elsevier, vol. 66(5), pages 691-706.
    • Handle: RePEc:eee:bushor:v:66:y:2023:i:5:p:691-706
    DOI: 10.1016/j.bushor.2023.02.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0007681323000319
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.bushor.2023.02.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Maurizio Zollo & Harbir Singh, 2004. "Deliberate learning in corporate acquisitions: post‐acquisition strategies and integration capability in U.S. bank mergers," Strategic Management Journal, Wiley Blackwell, vol. 25(13), pages 1233-1256, December.
    2. Stein, Jeremy C, 1997. "Internal Capital Markets and the Competition for Corporate Resources," Journal of Finance, American Finance Association, vol. 52(1), pages 111-133, March.
    3. Jay B. Barney & Mark H. Hansen, 1994. "Trustworthiness as a Source of Competitive Advantage," Strategic Management Journal, Wiley Blackwell, vol. 15(S1), pages 175-190, December.
    4. Sumantra Ghoshal & Nitin Nohria, 1989. "Internal differentiation within multinational corporations," Strategic Management Journal, Wiley Blackwell, vol. 10(4), pages 323-337, July.
    5. Aaron K. Chatterji, 2009. "Spawned with a silver spoon? Entrepreneurial performance and innovation in the medical device industry," Strategic Management Journal, Wiley Blackwell, vol. 30(2), pages 185-206, February.
    6. Melissa E. Graebner & Koen H. Heimeriks & Quy N. Huy & Eero Vaara, 2017. "The Process of Postmerger Integration : A Review and Agenda for Future Research," Post-Print hal-02276670, HAL.
    7. J. Fred Weston, 1989. "Divestitures: Mistakes Or Learning," Journal of Applied Corporate Finance, Morgan Stanley, vol. 2(2), pages 68-76, June.
    8. Sascha G. Walter & Simon Heinrichs & Achim Walter, 2014. "Parent hostility and spin-out performance," Strategic Management Journal, Wiley Blackwell, vol. 35(13), pages 2031-2042, December.
    9. Pearce, John A. & Patel, Pankaj C., 2022. "Reaping the financial and strategic benefits of a divestiture by spin-off," Business Horizons, Elsevier, vol. 65(3), pages 291-301.
    10. Soderberg, Andrew T. & Romney, Alexander C., 2022. "Building trust: How leaders can engender feelings of trust among followers," Business Horizons, Elsevier, vol. 65(2), pages 173-182.
    11. Laurence Capron & Will Mitchell & Anand Swaminathan, 2001. "Asset divestiture following horizontal acquisitions: a dynamic view," Strategic Management Journal, Wiley Blackwell, vol. 22(9), pages 817-844, September.
    12. Jon I Martinez & J Carlos Jarillo, 1989. "The Evolution of Research on Coordination Mechanisms in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 20(3), pages 489-514, September.
    13. repec:bla:jomstd:v:37:y:2000:i::p:395-425 is not listed on IDEAS
    14. Feldman, Emilie R., 2020. "Corporate Strategy: Past, Present, and Future," Strategic Management Review, now publishers, vol. 1(1), pages 179-206, March.
    15. Julian Birkinshaw & Henrik Bresman & Lars Håkanson, 2000. "Managing the Post‐acquisition Integration Process: How the Human Iintegration and Task Integration Processes Interact to Foster Value Creation," Journal of Management Studies, Wiley Blackwell, vol. 37(3), pages 395-425, May.
    16. Ranjay Gulati & Maxim Sytch, 2008. "Does familiarity breed trust? Revisiting the antecedents of trust," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(2-3), pages 165-190.
    17. Akbar Zaheer & Bill McEvily & Vincenzo Perrone, 1998. "Does Trust Matter? Exploring the Effects of Interorganizational and Interpersonal Trust on Performance," Organization Science, INFORMS, vol. 9(2), pages 141-159, April.
    18. Aseem Kaul, 2012. "Technology and Corporate Scope: Firm and Rival Innovation as Antecedents of Corporate Transactions," Strategic Management Journal, Wiley Blackwell, vol. 33(4), pages 347-367, April.
    19. Aseem Kaul & Paul Nary & Harbir Singh, 2018. "Who does private equity buy? Evidence on the role of private equity from buyouts of divested businesses," Strategic Management Journal, Wiley Blackwell, vol. 39(5), pages 1268-1298, May.
    20. Oleksandra Kochura & Nicola Mirc & Denis Lacoste, 2022. "From a dyadic to a triadic perspective: Divestiture research implications for understanding pre- and post-acquisition processes," Post-Print hal-03854006, HAL.
    21. Melissa E. Graebner & Koen H. Heimeriks & Quy N. Huy & Eero Vaara, 2017. "The Process of Postmerger Integration : A Review and Agenda for Future Research," Post-Print hal-02311973, HAL.
    22. Emilie R. Feldman, 2021. "The corporate parenting advantage, revisited," Strategic Management Journal, Wiley Blackwell, vol. 42(1), pages 114-143, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ai, Qi & Tan, Hui, 2020. "Uncovering neglected success factors in post-acquisition reverse capability transfer: Evidence from Chinese multinational corporations in Europe," Journal of World Business, Elsevier, vol. 55(3).
    2. Colman, Helene Loe, 2020. "Facilitating integration and maintaining autonomy: The role of managerial action and interaction in post-acquisition cabability transfer," Journal of Business Research, Elsevier, vol. 109(C), pages 148-160.
    3. Smeulders, Dieter & Dekker, Henri C. & Van den Abbeele, Alexandra, 2023. "Post-acquisition integration: Managing cultural differences and employee resistance using integration controls," Accounting, Organizations and Society, Elsevier, vol. 107(C).
    4. Wang, Daojuan & Hain, Daniel S. & Larimo, Jorma & Dao, Li T., 2020. "Cultural differences and synergy realization in cross-border acquisitions," International Business Review, Elsevier, vol. 29(3).
    5. Xiaoting Hu & Ximing Yin & Zhanming Jin & Jizhen Li, 2020. "How Do International M&As Affect Rival Firm’s Sustainable Performance? —Empirical Evidence from an Emerging Market," Sustainability, MDPI, vol. 12(4), pages 1-17, February.
    6. Ostapchuk, Igor & Gagalyuk, Taras & Curtiss, Jarmila, 2021. "Post-acquisition integration and growth of farms: the case of Ukrainian agroholdings," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(4), April.
    7. Williams, Christopher & van Triest, Sander, 2009. "The impact of corporate and national cultures on decentralization in multinational corporations," International Business Review, Elsevier, vol. 18(2), pages 156-167, April.
    8. Xiao, Jing, 2018. "Post-acquisition dynamics of technology start-ups: drawing the temporal boundaries of post-acquisition restructuring process," Papers in Innovation Studies 2018/12, Lund University, CIRCLE - Centre for Innovation Research.
    9. Nilsson, Magnus & Mattes, Jannika, 2015. "The spatiality of trust: Factors influencing the creation of trust and the role of face-to-face contacts," European Management Journal, Elsevier, vol. 33(4), pages 230-244.
    10. Zeng, Rong & Grøgaard, Birgitte & Steel, Piers, 2018. "Complements or substitutes? A meta-analysis of the role of integration mechanisms for knowledge transfer in the MNE network," Journal of World Business, Elsevier, vol. 53(4), pages 415-432.
    11. William E. Gillis & James G. Combs & David J. Ketchen Jr., 2014. "Using Resource–Based Theory to Help Explain Plural Form Franchising," Entrepreneurship Theory and Practice, , vol. 38(3), pages 449-472, May.
    12. Jensen, Paul H. & Palangkaraya, Alfons & Webster, Elizabeth, 2015. "Trust and the market for technology," Research Policy, Elsevier, vol. 44(2), pages 340-356.
    13. Strobl, Andreas & Bauer, Florian & Degischer, Daniel, 2022. "Contextualizing deliberate learning from acquisitions: The role of organizational and target contexts," Journal of Business Research, Elsevier, vol. 139(C), pages 194-207.
    14. Sears, Joshua B. & Hitt, Michael A., 2023. "Post-acquisition integrative invention and differences in the quality of target and acquirer technological capabilities," Journal of Business Research, Elsevier, vol. 156(C).
    15. Bidault, Francis & de la Torre, José R. & Zanakis, Stelios H. & Ring, Peter Smith, 2018. "Willingness to rely on trust in global business collaborations: Context vs. demography," Journal of World Business, Elsevier, vol. 53(3), pages 373-391.
    16. Zhang, Xiaotao & Liu, Yipeng & Tarba, Shlomo Y. & Giudice, Manlio Del, 2020. "The micro-foundations of strategic ambidexterity: Chinese cross-border M&As, Mid-View thinking and integration management," International Business Review, Elsevier, vol. 29(6).
    17. Goretzki, Lukas & Reuter, Marek & Sandberg, Joanna & Thulin, Gabriella, 2022. "Making sense of employee satisfaction measurement – A technological frames of reference perspective," The British Accounting Review, Elsevier, vol. 54(1).
    18. Andrews, Daniel S. & Fainshmidt, Stav & Newburry, William & Parente, Ronaldo & Haensel, Kira, 2023. "What determines subunit integration in the multinational firm? A meta-analysis," Journal of International Management, Elsevier, vol. 29(6).
    19. Campagnolo, Diego & Vincenti, Giampiero, 2022. "Cross-border M&As: The impact of cultural friction and CEO change on the performance of acquired companies," Journal of International Management, Elsevier, vol. 28(4).
    20. Randi Lunnan & Sverre Tomassen & Ulf Andersson & Gabriel R. G. Benito, 2019. "Dealing with headquarters in the multinational corporation: a subsidiary perspective on organizing costs," Journal of Organization Design, Springer;Organizational Design Community, vol. 8(1), pages 1-24, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:bushor:v:66:y:2023:i:5:p:691-706. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/bushor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.