Even though the number of annual takeovers has slightly decreased since the year 2000, acquisitions are still of great importance for companies. In the literature on corporate strategy various motivations for acquisitions are mentioned, among them the aim to secure further growth, the will to improve competitive positioning, and most importantly the goal to enhance performance. Whether acquisitions really have a positive effect on corporate performance, however, is not clear. According to empirical studies, the success rates of acquisitions only lie between 20 and 60 percent.
In view of these rather low and unsteady success rates, researchers in the field of strategic management have in the last 30 years devoted a lot of attention to the analysis of causes for success and failure of acquisitions. Their results show that various factors among them the ownership structure of a company, the size of a company, and the cultural compatibility between the acquisition partners have an influence on acquisition success.
Despite these intensive research efforts, the role of top managers of acquired companies has not caught very much attention of researchers in the past. Especially the causes and performance consequences of executive departures following acquisitions have only seldom been empirically analyzed, even though such a departure is a widely perceived phenomenon. Indeed, several empirical studies show quite consistently that in the first two years after an acquisition acquired companies are characterized by a significantly higher turnover rate among their top managers compared to both, the time before the acquisition and companies which did not undergo an acquisition process. It remains theoretically and empirically unclear, however, if this higher turnover rate has a negative, positive or no influence on post-acquisition performance.
Two theoretical positions have been brought forward in the literature on corporate strategy which come to very different conclusions regarding the relationship between executive departure following acquisitions and pre- as well as post-acquisition success. These two theoretical positions are corporate control theory and human capital theory. Corporate control theory argues that especially poorly managed and therefore less successful companies become acquisition targets. In this context, the substitution of the underperforming top management team after an acquisition has a positive impact on the subsequent success level of that company. Human capital theory follows a very different line of reasoning. It argues that top managers constitute a particularly important resource of a company. Thus, their departure means a significant loss of human capital which negatively affects the success level of the company after the acquisition.
contents
Summary
1. Introduction
2. Theoretical perspectives
- 2.1 Corporate Control Theory
2.2 Human capital theory
3. Research design
- 3.1 Description of the sample
3.2 Operationalization of variables.
- 3.2.1 Top management turnover
3.2.2 Pre- and post-acquisition performance
4. Results
- 4.1 Descriptive analysis of the sample
4.2 Analysis of dependencies
- 4.2.1 Overview of correlations between variables
4.2.2 Relationship between pre-acquisition performance and executive departure
4.2.3 Relationship between top management turnover and post-acquisition
performance
5. Discussion and interpretation
6. Implications for research and practice
References
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