Linking Merger and Acquisition Strategies to Postmerger Integration: A Configurational Perspective of Human Resource Management

Journal of Management
Vol. XX No. X, Month XXXX 1 –26
DOI: 10.1177/0149206315626270
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Linking Merger and Acquisition Strategies
to Postmerger Integration: A Configurational
Perspective of Human Resource Management
Nir N. Brueller
University of Haifa
Abraham Carmeli
Tel Aviv University
Gideon D. Markman
Colorado State University
The extant literature tends to frame mergers and acquisitions (M&As) and postmerger integra-
tion (PMI) as strategies and outcomes, but this framing often leaves their underlying processes
underexplored. We address this gap by redirecting attention to the view that M&As are largely
embedded in social and human practices. Our conceptual study identifies three generic M&A
strategies—annex & assimilate, harvest & protect, and link & promote—and matches them with
three well-known PMI outcomes (i.e., absorption, preservation, and symbiosis, respectively).
Using a configurational perspective and drawing upon the ability-motivation-opportunity
(AMO) model, we develop a conceptual framework that reveals why and how AMO-enhancing
human resource management (HRM) practices can link M&A strategies and PMI outcomes.
Finally, we elaborate on the theoretical and practical contributions and chart a course for
future inquiry and research applications for the M&A-HRM-PMI triad and its processes.
Keywords: merger and acquisition; postmerger integration; strategic human resource man-
agement; M&A-PMI relations; ability-, motivation-, and opportunity-enhancing
HRM practices
Acknowledgments: We wish to thank the editor and anonymous reviewers for their helpful and constructive feed-
back, as well as Esther Singer for her editorial comments on earlier drafts of this paper. We acknowledge the
financial support of the Eli Hurvitz Institute of Strategic Management at Tel Aviv University. The authors are listed
in alphabetical order.
Corresponding author: Nir N. Brueller, Faculty of Management, University of Haifa, 119 Abba Khoushy Ave.,
Haifa 31805, Israel.
Email: [e-mail]
626270JOMXXX10.1177/0149206315626270Journal of ManagementBrueller et al. / Human Resource Management Practices
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Firms use mergers and acquisitions (M&As) to accelerate their growth, seize and expand
on valuable capabilities, access assets (e.g., human capital) that are costly to imitate, and
even reduce competition—yet most M&A strategies fail to meet their objectives (Haleblian,
Devers, McNamara, Carpenter, & Davison, 2009). Acknowledging diverse factors that may
contribute to such failure (e.g., financial miscalculations, capability misalignment, and cross-
cultural mismatches), many studies and meta-analyses attribute the poor performance of
M&As to the intricate postmerger integration (PMI) phase (Datta, Pinches, & Narayanan,
1992; King, Dalton, Daily, & Covin, 2004). Indeed, the difficult-to-realize synergies and
destroyed value are among the reasons why M&A scholars are coupling their macrofocused
studies with microprocesses related to PMI (cf. Galpin & Herndon, 2014; Hitt, Harrison,
Ireland, & Best, 1998; Larsson & Finkelstein, 1999).
Research on PMI aims to explain the nature of acquirer-acquired relations as a means to
develop a normative theory that would guide future M&A scholarship and PMI practices
(Birkinshaw, Bresman, & Håkanson, 2000; Haspeslagh & Jemison, 1991). Acknowledging
that workplace and personnel issues present a core challenge in M&A-PMI contexts (e.g.,
Aguilera & Dencker, 2004; Chang, Gong, & Peng, 2012), we take a human resource manage-
ment (HRM) perspective to further develop this area of research. Synthesizing research in
management, finance, and economics, we offer a normative framework to explain why and
how HRM practices can configure M&A strategies into PMI outcomes (see Fig. 1 for an
overview of our conceptual model). Thus, our research question concerns why and how
HRM practices that focus on personnel can help translate M&A strategies into more effective
PMIs at the firm level.
Using an HRM perspective, our thesis aims to make two main contributions to the M&A
and PMI literatures. First, HRM is a foundational human capital mechanism for executing
Figure 1
A Broad Conceptual Model of Merger and Acquisition–Postmerger
Integration–Human Resource Management Relationships
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Brueller et al. / Human Resource Management Practices 3
diverse tasks and strategies. As an organizational infrastructure, HRM harnesses employees’
engagement to perform their jobs, manage resources, and fulfill firm-level objectives. HRM
practices are instrumental in addressing diverse workplace issues (e.g., recruiting, perfor-
mance assessment, job design and rotation, layoffs, and restructuring, to name a few). We
therefore theorize that an organizational infrastructure that aims to compound and extend
human effort is pivotal in M&A-PMI relations. Second, because an HRM perspective pro-
vides a fine-grained context that infuses microlevel processes into macrolevel theoretical
lenses, it should help clarify and explain how firms can match or configure their M&A-PMI
relations.
Building on the ability-motivation-opportunity (AMO) model (Appelbaum, Bailey, Berg,
& Kalleberg, 2000; Blumberg & Pringle, 1982; Chang et al., 2012), we explain how HRM
practices mediate the M&A-PMI relations. We also elaborate on the reasons behind this phe-
nomenon and show how each M&A-HRM-PMI path takes on different functions, follows
distinct logics, and yields specific interdependencies between acquiring and acquired firms.
Interestingly, this configurational approach also clarifies why even well-crafted M&A strate-
gies and well-intended PMIs are unlikely to fully meet their objectives, unless they are
matched—or configured—by suitable AMO-enhancing HRM practices.
To the best of our knowledge, this is a first attempt to clarify why and how HRM practices
mediate the relations between M&A strategies and PMI outcomes. Indeed, past studies
tended to frame acquisitions as events (e.g., the increased use of event-study methodologies),
but the introduction of an HRM lens stresses that M&A-PMI relations are better viewed as
processes through which HRM practices play a critical role—starting with due diligence dur-
ing the predeal stages through the transition phases that bring M&A strategies into PMI
outcomes.
Background Research: M&As, PMI, and HRM
Research on the M&A-PMI interface and HRM studies are rather vast, and despite their
scope and diversity, they have evolved with relatively limited overlap. To establish a base-
line, we start by synthesizing the M&As, PMI, and HRM literatures into a reasonably con-
densed review (for a full overview see some excellent articles, such as Haleblian et al., 2009;
Shi, Sun, & Prescott, 2012; Wright & Boswell, 2002). We then offer a conceptual elaboration
on why and how variations in HRM practices (i.e., those that leverage on AMO-enhancing
processes) mediate the relationship between M&A strategies and PMI outcomes. For clarity
and ease, Table 1 summarizes key constructs and offers examples.
M&A Strategies
Despite numerous studies, it is difficult to classify M&A strategies into distinct types
because M&As are diverse, have different aims, and thus often call for context-specific con-
siderations, processes, and capabilities. Earlier studies classify M&As on the basis of indus-
try designation, appearance, and objectives, and recent work adopts a more dichotomizing
view (e.g., horizontal vs. vertical, friendly vs. hostile, related vs. unrelated, domestic vs.
global, and even structural—e.g., “platform” vs. “bolt-on” acquisitions; Chatterjee &
Brueller, 2015; Haleblian et al., 2009). Such classifications have certainly improved our
understanding of M&As but do not sufficiently clarify the nature of disruption imposed upon
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4 Journal of Management / Month XXXX
acquisition parties, nor do they elaborate on the changes M&As impress on processes, opera-
tion, and HRM practices.
Following more nascent work, we deviate from a dichotomous view and group M&A
strategies into three main types—annex & assimilate, harvest & protect, and link & promote
acquisitions—chiefly on the basis of operational complexity, implications for PMI, and
HRM needs (Brueller, Carmeli, & Drori, 2014; Galpin & Herndon, 2014; Haleblian et al.,
2009; Koller, Goedhart, & Wessels, 2010). We describe each of the three M&A strategies in
more detail and offer examples shortly. As a preview, the annex & assimilate acquisitions
focus on absorbing targets’ assets, the harvest & protect acquisitions aim to capture and inte-
grate capabilities, and the link & promote acquisitions seek to cocreate boundary-spanning,
interfirm synergistic ties.
Table 1
Merger and Acquisition–Postmerger Integration–Human Resource Management
Relationships: Construct Labels, Functions, Definitions, and Examples
Merger and
Acquisition Strategies Annex & Assimilate Harvest & Protect Link & Promote
Merger and acquisition
goals
Absorbing assets
(primarily tangible) from
targets
Capturing and preserving
intangible assets
(e.g., capabilities,
partnerships) from
targets
Linking self-interest to shared
interest by cocreating
boundary-spanning
opportunities for both firms
as they operate independently
Strategic and
operational
leadership held by
. . .
Acquirer Target holds some
strategic and
operational power, but
acquirer sets the tone
Both targets and acquirers hold
ample strategic power and
operational leadership
PMI Outcomes Absorption Preservation Symbiosis
Examples The merger of United–
Continental Airlines
Cisco’s acquisition of
IronPort and Linksys
EMC’s acquisition of VMware
Autonomy of acquired
target
None (target is dissolved) Moderate and usually
operational and tactical
High and strategic
Relationship power Asymmetrical: All power
held by acquirer
Moderate: Most power
held by acquirer
Symmetrical and synergistic
Interfirm trust Minimal Moderate High
Human Resource
Management
Practices Ability Ability & Motivation
Ability, Motivation, &
Opportunity
Examples Recruitment, selection,
training
As in left cell, plus: As in left cells, plus:
Performance and
development
programs, competitive
pay systems, upward
career mobility
Flexible job designs, cross-
firm engagement programs,
transparent management
Practices designed
to . . .
Enhance personnel skills
and abilities of personnel
As in left cell, plus: As in left cells, plus:
Enhance motivation of
personnel
Empower employee to engage at
higher levels across both firms
Human capital focus Removal of redundancies
and integration of human
capital
As in left cell, plus: As in left cells, plus:
Personnel retention and
capability alignment
Reciprocal empowerment and
cause-based programs that
transcend firm boundaries
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Brueller et al. / Human Resource Management Practices 5
Annex & assimilate M&As. These acquisitions consume a target firm in its entirety or
reap core assets while dissolving redundant units, dated assets, and/or unneeded personnel
(Brueller et al., 2014). Acquirers aim to consolidate market power by annexing and digesting
targets’ core assets, and when merging parties are of equal size, their integration increases
in complexity (Chakravarthy & Lorange, 2007). When acquirers are exceptionally large and
targets are relatively small, both integration and digestion are reasonably simple, swift, and
fairly undisruptive. For instance, the global Danish cleaning company, Integrated Service
Solutions, has grown mostly by acquiring small local cleaning firms and quickly assimilat-
ing them (Horovitz, 2004). Integrated Service Solutions does not change itself substantively
but instead applies and enforces its own strategic planning, financial controls, culture, and
HRM systems throughout its absorbed targets (Chakravarthy & Lorange). When acquirers
and targets are large, even if their business models are quite similar—as is often seen in com-
modity industries, such as steel or oil and gas—the homogenization process is appreciably
more complex (e.g., BP’s merger with Arco and Amoco, Exxon with Mobil, and Chevron
with Texaco).
Under the “mergers of equals” scenario—especially where parties are quite sizable, have
a wide customer interface, and seek to combine most of their assets—complexity can quickly
become even more daunting. Consider, for instance, the 2010 merger of United and
Continental Airlines, which required the integration of two global networks, eight major
hubs, and 5,500 daily flights serving nearly 400 destinations. This complexity explains why
5 years later, United continued to grapple with myriad integration problems, including hob-
bled operations, angry passengers, and soured relations with employees. Another example is
the $30 billion merger between Ciba-Geigy and Sandoz that created pharmaceutical com-
pany Novartis. The combined firm opted to craft new strategies, processes, and capabilities
rather than adhere to those of either of its predecessors. The new strategy focused on life
sciences (i.e., nutrition, pharmaceuticals, and agriproducts), while the $7 billion Ciba
Specialty Chemicals business was spun off in 1997. The new processes included structuring
R&D by therapeutics (rather than geographic area) and shifting the firm’s compensation
policy from a system based on seniority to one based on performance across all departments
and managerial levels. These new capabilities entailed the creation of Novartis’ oncology
franchise (cf. Koller et al., 2010).
Thus annex & assimilate acquisitions—especially the mergers of equals—are monumen-
tal undertakings, with far-reaching and long-lingering operational complexities. The process
of homogenizing two firms (or more) into one often necessitates the development of new
strategies, retooled operations, restructured systems, and reorganized business models
(Brueller et al., 2014; Zott, Amit, & Massa, 2011).
Harvest & protect M&As. Acquirers use such M&As to seize new capabilities, processes,
and key personnel in order to expand their product offerings, enhance asset utilization, lever-
age on talent (e.g., improve R&D performance), and gain access to new markets (Puranam,
Singh, & Chaudhuri, 2009). For example, such acquisitions give firms flexibility to reallo-
cate personnel to more productive tasks across functions to fulfill new strategic direction
(Swaminathan, Groening, Mittal, & Thomaz, 2014). In these cases, preserving acquired
capabilities—which are often embedded in personnel—takes precedence over efforts to gain
scale advantage. Firms seeking these M&As can pursue either small or large targets. Small
targets are often startups with capabilities critical for product or technology extension, but
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6 Journal of Management / Month XXXX
their growth is hindered by insufficient capital infrastructure, scale expertise, or managerial
know-how (Brueller, Segev, Ellis, & Carmeli, 2015; King, Slotegraaf, & Kesner, 2008). For
example, small biotech companies typically lack the sales channels, marketing budget, and
ties with physicians, patients, and regulators needed to bring their products to markets (Mark-
man & Waldron, 2014). Larger firms often acquire smaller ventures for their innovation capa-
bilities, which would be more expensive or too slow to develop internally (Puranam et al.).
Because harvest & protect acquisitions focus on seizing, preserving, and realizing capa-
bilities, which are often embedded in personnel, we later explain why these acquisitions
require distinctly more specialized and involved HRM practices (and different human capital
focus) than those needed for the annex & assimilate M&As.
Link & promote M&As. These M&As are particularly unique because rather than focus-
ing on acquiring assets or capabilities, the primary aim is to cocreate boundary-spanning
and interfirm shared value creation that accelerate the growth and strength of both acquiring
and acquired firms (Chakravarthy & Lorange, 2007). Also, instead of grafting capabilities
of a target firm or force-fitting R&D units onto an acquirer’s asset base, the link & promote
acquisitions aim to accelerate interfirm learning and renewal. It is a regenerative, relational
effort where both firms coleverage complementary assets, capabilities, and know-how (Hale-
blian et al., 2009; Kanter, 2009). Thus, these acquisitions require discipline and foresight
to ensure that targets remain operationally and strategically autonomous, independent, and
self-sufficient. Indeed, the alignment of resources between two parties with complementary
competencies is a major operational challenge, but when executed well, it can bring synergis-
tic gains to both parties (Capron, Dussauge, & Mitchell, 1998; King et al., 2008).
When link & promote acquirers protect and promote their targets’ autonomy, both parties
improve knowledge exchange, mutual learning, innovation, and cross-operational agility
(Haleblian et al., 2009; Karim & Mitchell, 2000). For example, EMC’s $635 million acquisi-
tion of VMware, a computer-server software pioneer, allowed EMC to modularize two func-
tions—storage and server virtualization—that were previously incompatible. This loose
postacquisition governance resembles an alliance or a federation and was viewed by
VMware’s CEO as an optimal management structure (Butler, 2015). Naturally, the concepts
of complementarity, boundary spanning, and synergy are not new (Aldrich & Herker, 1977),
but their execution—particularly in M&A-PMI contexts—remains a challenge. As we show
below, however, it can be alleviated by suitable HRM practices.
To recap, annex & assimilate M&As focus on absorbing targets’ assets and dissolving
redundancies, while harvest & protect acquisitions seek to capture and preserve targets’ capa-
bilities—especially unique processes and key personnel. Link & promote M&As are distinct,
as the cogeneration of interfirm ties, regenerative learning, and synergies among business
units means that parties seek shared value creation by maintaining operational autonomy
while working synchronously on boundary-spanning projects and objectives.
PMI
Recognizing that M&As often trigger substantial restructuring, research that traditionally
asked outcome-focused questions, such as “Which acquisition strategy is likely to succeed?”
(Chatterjee, 1986; Chatterjee & Lubatkin, 1990; Lubatkin, 1983, 1987; Porter, 1987; Seth,
1990), began to shift toward process-related questions, such as “What processes and internal
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