Acquisition strategy and target resistance: A theory of countervailing effects of pre-merger bidding and post merger integration

This chapter examines the interrelationships among pre-merger acquisition strategy, target resistance and post-merger integration and the effects of these interrelationships on post-merger performance. Perspectives from financial and strategic management theory are combined to suggest that an interaction effect of pre-merger and post-merger activities more fully explains merged firm performance, especially in cases in which the acquiring'firm is related to the target. Relatedness between acquiring and target firms is more likely to lead to operating synergy, which may increase performance. However, potential positive effects from synergy are likely to be offset by resistance from target firm executives, which may lead to premium-increasing tactics, such as bidder solicitation or holding out for a higher price, or, in the post-merger stage, integration difficulties.