Dynamics of Acquired Firm Pre-Acquisition Employee Reactions

Abstract

Based on a qualitative, large-scale, interview-based inductive study of eight acquisitions conducted by Finnish multinationals, this article develops a grounded model of the dynamics of acquired firm employee reactions preceding related, industrial cross-border acquisitions. In contrast to most merger and acquisition (M&A) research portraying employee reactions in times of M&A in a negative, stressful light, the present findings shed a contradictory light on this discourse. In six of the studied acquisitions, pre-acquisition employee reactions tended toward motivation rather than uncertainty. The underlying reason was that these acquisitions were perceived as opportunities instead of threats in the target firms. As a result, target firm management became proactively involved in promoting the acquisition’s success. The author terms this target behavioral responsiveness and found it to result from (a) “static” factors (partner organizational attractiveness and target cognitive responsiveness) as well as (b) “dynamic” factors (partner behavioral attractiveness and target strategic responsiveness). Intriguingly, the dynamic factors were found to have a stronger predictive impact on target behavioral responsiveness. Indeed, in two of the acquisitions, their low ranking on static factors was countered by a high ranking on dynamic factors, namely, attractive partner behaviors and a strategically responsive target. Employee reactions to a forthcoming acquisition are thus not the deterministic result of the change itself, but can be influenced through buying firm behaviors and positive future intentions as well as the target experiencing a need to be acquired. Implications for M&A research are discussed, and a model and propositions to guide future research are suggested.

The effect of leadership style on talent retention during Merger and Acquisition integration: evidence from China

“…Several research studies in the field of M&A have used the case study approach to address various issues that arise following acquisitions, such as the management roles of the acquired firm (Graebner, 2004), the seller's view of the acquisition process (Graebner and Eisenhardt, 2004), explorations of the dynamics of pre-acquisition employee reactions in the acquired firm (Teerikangas, 2012), knowledge transfer in M&As (Ranft and Lord, 2002,;Zou and Ghauri, 2008), trust in M&As (Stahl, Larsson, Kremershof, and Sitkin, 2011) and trust asymmetries in acquisitions of entrepreneurial firms (Graebner, 2009), cultural clashes in high-tech M&As (Drori, Wrzesnievski, and Ellis, 2011), and the implementation of post-acquisition integration approaches (Monin, Noorderhaven, Vaara, and Kroon, 2012;Schweizer, 2006;Teerikangas, Very, and Pisano, 2011). Consistent with earlier research and owing to the interpretive nature of the study, we adopted an in-depth case study together with semi-structured interviews.…”

Perceptions of justice and organisational commitment in international mergers and acquisitions

“…This is important for two reasons. First, research shows that perceptions of nonmanagerial employees have a strong impact of mergers performance (Glaister & Ahammad, 2010;Melkonian et al, 2011;Teerikangas, 2012;Weber & Fried, 2011a;Weber, RachmanMoore, & Tarba, 2012). Second, the findings will provide a deeper understanding as to the how the perceptions of procedural and interactional justice change throughout the organisational hierarchy.…”

Managing talent across advanced and emerging economies: HR issues and challenges in a Sino-German strategic collaboration

“…For instance, the dynamic reactions of employees in collaborative partnership can provide the resources to address organizational and economic issues collectively (Weber and Fried, 2011b;Teerikangas, 2012). Furthermore, different leadership styles may affect HR talent retention during M&A integration (Zhang, Ahammad, Tarba, Cooper, Glaister, and Wang, 2015).…”

“…It offers the possibility for firms to address organizational and economic factors, thus in turn affect the HR practices from a behavioural perspective. Considering mergers and acquisitions as an example, HR practices remain a salient issue affecting M&A performance (Weber and Tarba, 2010;Weber, Tarba, and Reichel, 2011), and integration process (Weber and Fried, 2011a).For instance, the dynamic reactions of employees in collaborative partnership can provide the resources to address organizational and economic issues collectively (Weber and Fried, 2011b;Teerikangas, 2012). Furthermore, different leadership styles may affect HR talent retention during M&A integration (Zhang, Ahammad, Tarba, Cooper, Glaister, and Wang, 2015).…”