Managers' reactions to a corporate acquisition: A test of an integrative model

Abstract

Drawing upon previous theoretical and empirical work on mergers and acquisitions, survivors' reactions to layoffs, organizational stress, and perceived personal control, we proposed a structural model of managers' reactions to the acquisition of their company.The model was evaluated on the basis of survey data collected from a sample of middlelevel managers ( N = 91) whose company was acquired through a hostile takeover by another company. Both were Fortune 500 companies. Though most variables were measured 16 months after the initial implementation phase of the merger, manifest indicators of change in job control were measured twice: at the beginning of the implementation phase and 16 months later. Mixed latent/manifest variable structural equations analyses provided results that were generally consistent with the proposed model. Implications of the results as well as suggestions for future research are discussed.

How is the Firm Dealing with the Merger? A Study of Employee Satisfaction with the Change Process

“…As it was highlighted in the results, such employee perception of unfairness may negatively affect their satisfaction, commitment, and trust, and intention to stay after a merger (Dailey & Kirk, 1992;McFarlin & Sweeney, 1992). It could also influence their attitudes and behaviours resulting in them developing psychological withdrawals with a consequential turnover for the firm (Fried, Tiegs, Naughton, & Ashforth, 1996;Gutknecht & Keys, 1993). It is indicative from the results that changing employees' role was also another source of dissatisfaction.…”

Does supporting employees' career adaptability lead to commitment, turnover, or both?

“…However, it is lower than the alpha of .72 found by McGee and Ford (1987). Intention to leave was measured by two items ( = .72) that were developed by Fried, Tiegs, Naughton, and Ashforth (1996). A sample item is: "I am planning to search for a new job during the next 12 months.…”

A Corporate Level Perspective on Acquisitions and Integration

“…Fried et al, 1996;Greenwood et al, 1994;Schweiger et al, 1991). Research shows that acquisition announcements -especially in combination with poor handling of the communication -increase uncertainty, stress, and absenteeism, while reducing job satisfaction, commitment, the intent to remain in the new organization, and perceptions about organization's trustworthiness (Schweiger et al, 1991).…”

“…The impact of such organizational change is particularly strong on employees who perceive that they lack control on the forces of change. Such employees are likely to feel a greater reduction in job control, experience feelings of helplessness, withdraw psychologically from the work they do, and generate an intention to leave the organization (Fried et al, 1996). Another impact of acquisition activity is that middle level managers sometimes centralize authority in order to strengthen or protect their own position (Pfeffer, 1981;Sutton & D'Aunno, 1989).…”

“…Questions include how acquiring firms retain, redeploy, reconfigure, and divest resources (Capron, Dussuage, & Mitchell, 1998;Capron, Mitchell, & Swaminathan, 2001;Finkelstein & Haleblian, 2002;Karim & Mitchell, 2000); the background organization and human processes that occur during post-acquisition integration (Fried, Tiegs, Naughton, & Ashford, 1996;Greenwood, Hinings, & Brown, 1994;Schweiger & DeNisi, 1991); how the nature and extent of prior acquisition experience affects focal acquisition management (Haleblian & Finkelstein, 1999;Zollo & Singh, 2004); the choice of the level of integration (Datta, 1991;Pablo, 1994); and the performance implications of implementing high or low integration (Zollo et al, 2004). Most of this research has focused on the acquiring business unit, without explicit attention to corporate processes for managing acquisition-based growth.…”