Integration planning for technology intensive acquisitions

Abstract

Rapid technological change, growing technological complexity and shortening product life cycles increasingly force companies to source technologies externally. One means of building up competencies and fostering innovation based on external resources such as knowledge is through the acquisition of technology‐based companies. However as literature and practice have shown, technologically motivated and intensive acquisitions are highly vulnerable to failure. One of the main reasons for this value destruction lies in the miscarried and inappropriate integration of the technology‐based company after the acquisition. Based on eight in‐depth case studies on technology intensive acquisitions in multi‐national technology‐based companies this paper aims to identify the main causes of failure in internalizing external knowledge during the integration of technology intensive acquisitions. It was derived that a lack of integrative decision‐making, of systemic processes and of a holistic change of both companies during the integration hinders successful knowledge sourcing through acquisitions. Based on these findings, a concept for integration planning which is tailored towards the specific characteristics of technology intensive acquisitions is proposed. This concept is embedded in the acquisition process and encompasses the development of an appropriate integration strategy and the determination, assessment and planning of the required integration projects thus fostering successful knowledge sourcing.

Getting post-M&A integration mechanisms tuned in to technological relatedness and innovation synergy realisation

“…Hereafter, we focus on the PMAI of R&D functions that involves changes in R&D and other innovation-related arrangements, organisational structures, systems, and cultures, following an M&A until it is business as usual again (Gerpott 1995). It is during this integration process that much of the (projected) synergy is created, or destroyed (Haspeslagh and Jemison 1991;Bannert and Tschirky 2004).…”

“…While M&As may create a potentially attractive combination (Larsson and Finkelstein 1999) to raise the innovation performance of companies (Ahuja and Katila 2001;Prabhu, Chandy, and Ellis 2005;Cloodt, Hagedoorn, and van Kranenburg 2006;Hussinger 2010), critical for realising the potential innovation synergies is the quality of the post-M&A integration (PMAI) (Haspeslagh and Jemison 1991;Ranft and Lord 2002;Epstein 2004;Grimpe 2007). Some companies organise an R&D-specific approach to PMAI, as they consider the importance of the R&D function for the future of organisations and the variety of innovation synergies to be realised (Gerpott 1995;Bannert and Tschirky 2004;Schweizer 2005;Kawazoe and Abetti 2014). We define PMAI as a temporary process, comprising primarily strategic and tactical management decisions, and related activities with the aim of fostering the integration of two companies, following the closure of the deal until it is business as usual again.…”

Proximity, knowledge transfer, and innovation in technology-based mergers and acquisitions

“…Research shows that post-M&A integration is key to M&A success or failure (Bannert and Tschirky, 2004;Puranam and Srikanth, 2007). Management can intervene when proximity dimensions such as alienating cultural practices (Brannen and Peterson, 2009) impact knowledge transfer and innovation negatively.…”

Developing Shared Product Platforms During a Merger: The Fiat-Chrysler Case

“…Also, standardization of systems exhibits positive links with the R&D outcomes and innovative capabilities after a merger (Chakrabarti, Hauschildt, and Suverkru, 1994;Grimpe, 2007). Bannert and Tschirky (2004) showed that the integration process in M&As positively affects M&As' performance if characterized by a holistic change of the merging companies in all the following dimensions: functional and technological, organizational and structural, socio-cultural and legal, financial and IT. Such integration is more complex in cross-border acquisitions, when often firms have different bundles of resources, knowledge and organizational routines (Morosini et al, 1998).…”

“…As Quah and Young (2005) pointed out in international acquisitions the management of both cultural and organizational integration requires caution to avoid conflicts but caution is also suggested because of market factors, and particularly adverse customer responses may derive from the firms' inability to account for differences in developing new products. Bannert and Tschirky (2004) suggested that the organization of the technological integration activities aimed at preserving the capabilities as embedded into the acquired firm's specific context, should focus on the creation of specialized teams, to preserve each firm's key knowledge and competences and, at the same time, on integration mechanisms that allow the cross-fertilization of each team's areas of excellence. Bannert and Tschirky (2004) suggest that diverse areas of integration, from the technical to the cultural, show higher performance if dedicated teams manage them.…”