Handbook of Research on Mergers and Acquisitions
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Handbook of Research on Mergers and Acquisitions

Edited by Yaakov Weber

For the last four decades, researchers in various disciplines have been trying to explain the enduring paradox of the growing activity and volume of mergers and acquisitions (M & A) versus the high failure rate of M & A. This Handbook will stimulate scholars to focus on new research directions.
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Chapter 11: Grief and the management of mergers and acquisitions

Philippe Very, Emmanuel Metais and Pierre- Guy Hourquet


The apparent high failure rate of mergers and acquisitions (M & A) has generated a huge amount of research seeking explanations for the performance of these strategic moves. However, as some authors have noted (King et al., 2004), there is a need for creativity in this area because research findings poorly explain the variance in acquisition performance. One area where a comprehensive framework is lacking is the study of the association between the nature of the deal and its performance. The nature of the deal refers to whether the acquisition is a friendly or a hostile one. Deals are classified as hostile when the target resists the intrusion of the potential acquirer, and generally involve the takeover of listed companies. Friendly transactions occur when the acquirer and the target negotiate and find a mutually satisfying agreement for transferring control of the target to the acquirer. In theory, one would expect value creation from this collaborative approach to acquisition to be easier than creating value from a hostile takeover. This assumption is not corroborated by M & A performance studies, however, as hostile bidders tend to outperform friendly acquisitions in the long run in terms of shareholder value creation (Sudarsanam and Mahate, 2006). This counterintuitive finding leads to the following research question: why do hostile acquirers outperform friendly ones? Researchers in finance have tested diverse explanations for the superior performance of hostile bids with more or less success. They have analyzed the choice of acquisition target and the method of payment or costs associated with these strategic moves.

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