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Target screening: a key strategic success factor for acquisitions

In: A Research Agenda for Mergers and Acquisitions

Author

Listed:
  • Florian Bauer
  • Mai Anh Dao

Abstract

Acquisitions are a core strategic tool for corporate development. Despite the practical relevance and the increased research interest, acquisitions on average fail. Failure is typically attributed to poor integration; implicitly this assumes that firms can identify and acquire the best fitting target in the first place. This is problematic and we take a closer look at the target screening phase of an acquisition. During target screening, an acquirer can translate the strategy into screening criteria and after an evaluation of potential targets, creating an actionable shortlist. However, while this process appears to be straightforward or textbook like, we find through qualitative research that the practices managers employ during target screening give rise to heuristics and cognitive simplifications that trigger cognitive biases. This offers a novel explanation for why many acquisitions fall short in creating value.

Suggested Citation

  • Florian Bauer & Mai Anh Dao, 2024. "Target screening: a key strategic success factor for acquisitions," Chapters, in: David R. King & Olimpia Meglio (ed.), A Research Agenda for Mergers and Acquisitions, chapter 2, pages 41-64, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:22671_2
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    File URL: https://www.elgaronline.com/doi/10.4337/9781035319077.00011
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