Developing scenarios for post-merger and acquisition integration: a grounded theory of 'risk bartering'

Abstract

Whilst recent evidence suggests that the fifth ‘wave’ of global merger and acquisition (M&A) activity is coming to an abrupt end, the growth of M&A activity continued apace throughout the last decade of the twentieth century, with the year 2000 seeing an unprecedented US$3.5 trillion worth of deals worldwide (The Economist, January 25th 2001). Considering the monetary values involved, it is perhaps surprising that only around half of the combinations will deliver the value or savings upon which the deals are justified. Mergers and acquisitions can therefore be deemed extremely risky ventures.

In response to this dilemma, this thesis brings together the fields of project risk management and mergers and acquisitions, an overlap that is particularly under-developed in the extant literature. Adopting a grounded theory approach (Glaser and Strauss, 1967; Strauss and Corbin, 1998), a four-year worldwide integration programme within a FTSE100 healthcare company was analysed. The research aimed to secure an understanding of the complex dynamics of human actions and interactions relating to the phenomena of risk management whilst developing scenarios during the post-merger and acquisition integration phase.

Through the development of a substantive theory of ‘risk bartering’, the research has discovered that whilst operating within a ‘confidentiality bubble’, some individuals were using an (often unfounded) increase or decrease in potential risks for ulterior motives. Rather than, as is the case in contemporary project risk management, the scenarios being developed and then the risks being assessed, the risks were being used to develop and shape the final scenarios. As a result, risks were being transposed from the individual to the organisation. This central finding has the potential to adversely affect the risk efficiency of the organisation, especially where levels of risk management maturity (Hillson, 1997) are ‘naïve’ or ‘novice’. Recommendations are made to ring fence the level of risk bartering, with the view to striking a balance between gaining individual ownership of the resultant change programme and optimising the organisation’s risk efficiency, thereby increasing the chances of a successful integration.

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ORCID for Ian Alexander Harwood: orcid.org/0000-0002-8647-2169

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