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A Balance Model for Evaluating Firms for Acquisition

Author

Listed:
  • Vithala R. Rao

    (Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853)

  • Vijay Mahajan

    (Graduate School of Business, University of Texas, Austin, Texas 78712)

  • Nikhil P. Varaiya

    (College of Business Administration, San Diego State University, San Diego, California 92182)

Abstract

In recent years, the U.S. corporate world has been dominated by a spectacular spate of mergers and acquisitions. Firms are seeking out partners that will provide them the necessary leverage to achieve their various growth and diversification goals. Based on the balance model developed by Farquhar and Rao, this paper suggests a multi-attribute approach for evaluating acquisition partners. The appropriateness of this approach in the decision of one firm to acquire another firm is investigated using experimental methods. The context of the cosmetic industry is used in this empirical application. Results indicate that the balance model is quite suitable in describing the acquisition decision.

Suggested Citation

  • Vithala R. Rao & Vijay Mahajan & Nikhil P. Varaiya, 1991. "A Balance Model for Evaluating Firms for Acquisition," Management Science, INFORMS, vol. 37(3), pages 331-349, March.
    • Handle: RePEc:inm:ormnsc:v:37:y:1991:i:3:p:331-349
    DOI: 10.1287/mnsc.37.3.331
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    Citations

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    Cited by:

    1. Yu Yu & Nita Umashankar & Vithala R. Rao, 2016. "Choosing the right target: Relative preferences for resource similarity and complementarity in acquisition choice," Strategic Management Journal, Wiley Blackwell, vol. 37(8), pages 1808-1825, August.
    2. Violeta SACUI & Madalina Dumitrita MATICIUC, 2020. "The Sources of Revenue Synergies in Mergers & Acquisitions," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 21(4), pages 592-602, October.
    3. Karsu, Özlem & Morton, Alec, 2014. "Incorporating balance concerns in resource allocation decisions: A bi-criteria modelling approach," Omega, Elsevier, vol. 44(C), pages 70-82.
    4. Esther Gal-Or & Qiaoni Shi, 2022. "Designing Entry Strategies for Subscription Platforms," Management Science, INFORMS, vol. 68(10), pages 7597-7613, October.
    5. John L Naman & Dennis P. Slevin, 1993. "Entrepreneurship and the concept of fit: A model and empirical tests," Strategic Management Journal, Wiley Blackwell, vol. 14(2), pages 137-153, February.

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