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To integrate or not to integrate ? complementarity, similarity, and acquisition value creation

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  • Zaheer, Akbar
  • Castaner, Xavier

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  • Souder, David
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    Abstract

    In this paper, the authors explain that relatedness is often associated with acquisition value creation without distinguishing between three underlying sources of synergy: business similarity, product complementarity and geographic complementarity. The authors argue that realizing value in acquisitions requires maching the type of relatedness with the appropriate degree of integration; specifically high integration for business similarity, medium integration for product complementarity and low integration for geographic complementarity. Empirical validation, broadly supporting their hypotheses comes from 88 M&As

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    Bibliographic Info

    Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 814.

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    Length: 40 pages
    Date of creation: 24 Jan 2006
    Date of revision:
    Handle: RePEc:ebg:heccah:0814

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    Keywords: mergers and acquisitions; value creation; integration;

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    1. Healy, Paul M. & Palepu, Krishna G. & Ruback, Richard S., 1992. "Does corporate performance improve after mergers?," Journal of Financial Economics, Elsevier, Elsevier, vol. 31(2), pages 135-175, April.
    2. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 19(2-3), pages 179-208, April.
    3. Hitt, Michael A. & Harrison, Jeffrey S. & Ireland, R. Duane, 2001. "Mergers and Acquisitions: A Guide to Creating Value for Stakeholders," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195112856, October.
    4. JS Armstrong & Terry Overton, 2005. "Estimating Nonresponse Bias in Mail Surveys," General Economics and Teaching, EconWPA 0502044, EconWPA.
    5. Nicolaj Siggelkow, 2002. "Misperceiving Interactions Among Complements and Substitutes: Organizational Consequences," Management Science, INFORMS, INFORMS, vol. 48(7), pages 900-916, July.
    6. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, Elsevier, vol. 80(1), pages 123-129, July.
    7. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, Elsevier, vol. 11(1-4), pages 5-50, April.
    8. Teece, David J., 1980. "Economies of scope and the scope of the enterprise," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 1(3), pages 223-247, September.
    9. Milgrom, Paul & Roberts, John, 1995. "The Economics of Modern Manufacturing: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 85(4), pages 997-99, September.
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