Managing Emotions in Mergers And Acquisitions (New Horizons in Management Series)

221 Pages·2005·2.12 MB·English

by  Verena Kusstatscher

Managing Emotions
in Mergers and Acquisitions
NEW HORIZONS IN MANAGEMENT
Series Editor:Cary L. Cooper, CBE Professor of Organizational Psychology and
Health,Lancaster University Management School,Lancaster University,UK
This important series makes a significant contribution to the development ofman-
agement thought.This field has expanded dramatically in recent years and the series
provides an invaluable forum for the publication of high quality work in manage-
ment science,human resource management,organisational behaviour,marketing,
management information systems,operations management,business ethics,strate-
gic management and international management.
The main emphasis ofthe series is on the development and application ofnew orig-
inal ideas.International in its approach,it will include some of the best theoretical
and empirical work from both well-established researchers and the new generation
of scholars.
Titles in the series include:
The Handbook of Human Resource Management Policies and Practices in Asia-
Pacific Economies
Volume One
Michael Zanko
The Handbook of Human Resource Management Policies and Practices in Asia-
Pacific Economies
Volume Two
Michael Zanko and Matt Ngui
Human Nature and Organization Theory
On the Economic Approach to Institutional Organization
Sigmund Wagner-Tsukamoto
Organizational Relationships in the Networking Age
The Dynamics of Identity Formation and Bonding
Edited by Willem Koot,Peter Leisink and Paul Verweel
Islamic Perspectives on Management and Organization
Abbas J.Ali
Supporting Women’s Career Advancement
Challenges and Opportunities
Edited by Ronald J.Burke and Mary C.Mattis
Research Companion to Organizational Health Psychology
Edited by Alexander-Stamatios G.Antoniou and Cary L.Cooper
Innovation and Knowledge Management
The Cancer Information Service Research Consortium
J.David Johnson
Managing Emotions
in Mergers and
Acquisitions
Verena Kusstatscher
Formerly Lecturer at UMIST Manchester School of
Management,UK and now consultant to organizations on
M&A issues
Cary L. Cooper, CBE
Professor of Organizational Psychology and Health,Lancaster
University Management School,Lancaster University,UK
NEW HORIZONS IN MANAGEMENT
Edward Elgar
Cheltenham,UK • Northampton,MA,USA
© Verena Kusstatscher and Cary L.Cooper 2005
All rights reserved.No part of this publication may be reproduced,stored in
a retrieval system or transmitted in any form or by any means,electronic,
mechanical or photocopying,recording,or otherwise without the prior
permission of the publisher.
Published by
Edward Elgar Publishing Limited
Glensanda House
Montpellier Parade
Cheltenham
Glos GL50 1UA
UK
Edward Elgar Publishing,Inc.
136 West Street
Suite 202
Northampton
Massachusetts 01060
USA
A catalogue record for this book
is available from the British Library
ISBN1 84542 081 0
Printed and bound in Great Britain by MPG Books Ltd,Bodmin,Cornwall
Contents
List of figures and tables vii
Acknowledgments viii
1 Introduction 1
1.1 Why a book about emotions in mergers and
acquisitions is needed 1
1.2 M&As and management challenges 2
1.3 M&As and research challenges 4
1.4 Objectives and contribution 6
1.5 Organization of the study 7
PART I UNDERSTANDING M&AAND EMOTIONS
2 The M&A process 11
2.1 The merger phenomenon 11
2.2 The ‘tough’‘soft factors’of mergers and acquisitions 17
2.3 The merger syndrome 25
3 Post-merger integration as a change of social identity 31
3.1 Social identity theory 32
3.2 Post-merger integration from a social identity perspective 34
3.3 Social identity theory and emotions 36
3.4 Conditions for the creation of a common social identity 40
4 Emotions in post-merger integration 46
4.1 Theoretical bases 46
4.2 Emotions in M&A literature 60
4.3 M&As as cause of emotions 63
4.4 M&A outcomes as effect of emotions 64
4.5 Development of a conceptual framework 75
PART II CASE STUDIES ON EMOTIONS IN M&A
5 Purpose 79
v
vi Contents
6 Information gathering and how to measure emotions 81
6.1 Which approaches to emotion measurement have been
used in past studies? 81
6.2 Methods and techniques to study emotions in M&As 85
6.3 Interview guideline for the case studies 88
6.4 Selection of the cases 94
6.5 Procedure 98
7 Emotions 101
7.1 The ‘temperature curve’ 102
7.2 Collective versus individual emotions 107
7.3 Different kinds of emotions 108
7.4 Positive and negative emotions 110
8 Managerial communication 112
8.1 Importance of communication 112
8.2 The announcement 112
8.3 Communication frequency and intensity 117
8.4 Rumours 120
8.5 Media releases and public opinion 121
9 Managerial behaviour 124
9.1 Implementation of M&A strategies 125
9.2 Integration activities 129
9.3 Convincing people 132
9.4 Dismissals 134
10 M&A Outcomes 145
10.1 Employees’identification and commitment 145
10.2 Employees’job satisfaction 148
10.3 Relationships 150
10.4 Perceived performance 153
PART III CONCLUSIONS
11 Discussions 157
11.1 Recapturing emotions in M&As 157
11.2 Limitations of the study 164
11.3 Implications for future studies 166
11.4 Implications for management 169
Bibliography 175
Index 203
Figures and tables
Figure 2.1 Merger wave:transaction volumes worldwide,in
billions US$ 12
Figure 2.2 Structured summary in the context of the ‘merger
syndrome’ 26
Figure 4.1 Cognitive appraisal approach on emotions 56
Figure 4.2 Managerial influences on employees’emotions 64
Figure 4.3 The influence of social identity on M&A outcomes 66
Figure 4.4 Development of a conceptual framework 75
Figure 4.5 Conceptual framework 76
Figure 6.1 Template for the ‘temperature curve’ 87
Figure 7.1 ‘Temperature curve’:a respondent’s longitudinal
perspective 102
Figure 7.2 Combined ‘temperature curves’ 103
Figure 7.3 Top managers’perception of employees’‘temperature
curves’ 104
Figure 7.4 Middle managers’‘temperature curves’ 105
Figure 7.5 Employees’‘temperature curves’ 106
Figure 7.6 Combined ‘temperature curves’from respondents of
company X 106
Figure 7.7 Combined ‘temperature curves’from respondents of
company Y 107
Table 6.1 Qualitative research approach and applied methods &
techniques 89
Table 6.2 Company demographics 96
Table 7.1 Emotions and cognition-related affect terms 109
vii
Acknowledgments
The curiosity to comprehend people and their emotions was the driving
force for this book.The desire to make organizational changes more pleas-
ant and successful experiences brought the inspiration. And the vision to
bring people together made this book happen.
Many people have helped me to grow during this period.I would like to
thank all ofthem,but particularly those who have contributed to the devel-
opment of this book, and first of all my co-author Cary, without whose
enthusiasm and initiative you would not hold this book in your hands.He
is one of the greatest motivators I have ever met.
My gratitude goes to Professor Hans Mühlbacher for his inspiring lead-
ership during my time at Innsbruck University. Many of his astute ques-
tions and critical remarks contributed to this book. There are several
people I acknowledge for stimulating and thought-provoking discussions,
in particular my partner Rudolf Sinkovics, my friends Wolfgang Rigger
and Dr Mo Yamin,Professor Pervez Ghauri and Professor Sue Cartwright.
They all are embedded in this book in some shape or form.
Valuable time and support were received from the interview partners of
Leitner,Schwarzkopf,Sportler and Zumtobel Staffwho kindly shared their
knowledge and M&A experiences. The learnings from these discussions
were eye-opening and greatly appreciated.I hope that readers of this book
benefit from them and are even better at leading and dealing with mergers
and acquisitions in the future.
Many thanks go also to my supportive friends,and all my love to Rudolf,
my parents Maria and Sepp, and Elisabeth and Iris for their emotional
backing and for always believing in me.
Verena Kusstatscher
Professor Cooper would also like to thank Professor Sue Cartwright for
stimulating his work in the field of mergers and acquisitions.
Manchester,November 2004
viii
1. Introduction
1.1 WHY A BOOK ABOUT EMOTIONS IN
MERGERS AND ACQUISITIONS IS NEEDED
Emotions play a crucial role in everybody’s life. They are always present,
they enrich experiences,challenge and make us feel alive.Over the last few
decades,emotions have been studied in different disciplines.Psychologists,
sociologists, anthropologists, philosophers, brain researchers, neurobio-
logists and neurophysiologists approached this subject from diverse per-
spectives and agreed that emotions strongly influence human thinking
andacting.
While mainstream management literature is still on a ‘rational’ track
thatdisregardsemotions,somerecentdevelopmentsrecognizetheimport-
anceof addressingemotionsinorganizations.Thesameistrueformerger
and acquisition (M&A) literature. Day-to-day perceptions confirm that
mergers and acquisitions are highly emotional life events for all those
affected.Butonlyafteryearsof‘mergermania’,combinedwithhighfailure
rates(about70percentof allmergersfailtoreachtheirinitialgoals),has
the importance of focusing on ‘soft’ issues been acknowledged. Never-
theless, even within the people-oriented stream of M&A literature, emo-
tions as such are still underresearched. Emotions are mentioned in the
context of the so-called ‘merger syndrome’, but they are almost never
studiedexplicitly.
1.1.1 Why Should Managers Learn about Emotions?
Considering the high M&A failure rates, which are often combined with
personal human tragedies, managers have to ask themselves: what can
leaders do to make a merger or an acquisition a more successful and a more
pleasant experience for all those affected? The present book was inspired
by this highly relevant question,which has only received limited attention
in current M&A literature.
1