Optimizing implementation schedules for a successful post-merger integration (PMI): a behavioral view

Author's Department

Management Department

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https://doi.org/10.1108/JBS-03-2024-0041

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Marina Apaydin

Document Type

Research Article

Publication Title

Journal of Business Strategy

Publication Date

1-1-2025

doi

10.1108/JBS-03-2024-0041

Abstract

Purpose This paper investigates the dual role of time in post-merger integration (PMI). Prior qualitative research has focused on the determinants of merger and acquisition (M&A) success and highlighted the importance of meeting implementation schedules as a pivotal, yet usually unachieved, goal of a PMI (Apaydin, 2008). The purpose of this study is to uncover the behavioral determinants of M&A failures. Design/methodology/approach This paper proposes a novel empirical study to further the understanding of how PMI time schedules are initially set and why they are missed most of the time. This study is grounded in the heuristics, biases and temporal orientation literature. It has an experimental 2 × 2 between-subjects design whereby financial analysts are asked to create a PMI implementation schedule under two conditions (participation vs nonparticipation in PMI) and two scenarios (less complex data vs more complex data). Findings This study helps to explain the so-called M&A success paradox (double digit M&A growth in spite of 60%−90% failure rates). Financial analysts, who rarely participate in PMI, underestimate implementation time, which then becomes an excessively short deadline, usually missed because of unanticipated integration complexity. Research limitations/implications Being devised in general terms, this framework is based on certain assumptions and has limitations. The model assumes two firms participating in an M&A, while in real-world scenarios there is a small possibility for additional firms to enter the deal. Furthermore, the study design involved role-playing exercises using hypothetical PMI scenarios, which while useful for isolating specific cognitive biases and behavioral tendencies, may not fully capture the dynamic, political and emotional complexity of real-world integration contexts. Given the convenience sample of the experimental study, the generalization might be limited. Practical implications The proposed concepts have far-reaching implications for managers. Participation of the PMI manager in forecasts, and awareness of the behavior biases, can lead to more realistic expectations. Given the low success rate across the board, but the persistent growth of M&A transactions, managers can learn how to be more successful by either redefining success, or by speeding up the process. The former can be done by learning how to deal with discrepancies in the aspirations of different stakeholders, and how to adjust the expectations based on the level of integration complexity. The latter would require a rigorously planned and enforced organizational learning process to aid in dealing with integrations of high complexity. Social implications This paper has important social implications. Finance as a field based on numbers, has been long considered an “objective” science, whereas the experimental research studies the “social” aspects of human biases involved in a complicated process of M&A evaluation and subsequent PMI process. Originality/value The main contribution of this paper is the theoretical explanation and the empirical testing of the role of time in PMI. Financial analysts, who rarely participate in PMI, underestimate implementation time, which then becomes an overly ambitious deadline, usually missed because of unanticipated integration complexity. The theoretical contribution lies in application of the basic psychological theories to explain behavior of PMI evaluators. The empirical contribution of this paper is particularly significant as only 3% of the empirical research published in the strategic management literature used an experimental design (Schwenk and Dalton, 1991). (Highhouse et al. 2002) point out that experimental research is much needed for the strategic field of inquiry to develop constructs of high internal validity.

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