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MD
43,2 The role of broader context and
the communication program in
merger and acquisition
236
implementation success
Vassilis M. Papadakis
Athens University of Economics and Business, Athens, Greece
Abstract
Purpose – To investigate what actually influences a merger and acquisitions (M&As) successful
implementation. Despite the significant research interest in this topic our knowledge is still incomplete.
Design/methodology/approach – Our approach differs from traditional research efforts in the
field. First, it explores the influence of a range of factors including external corporate environment,
company characteristics, communication program and the characteristics of the M&A itself. Second, it
is based on a comparatively large sample of 72 in-depth studied M&As which took place in Greece.
Findings – Results indicate that the existence of a communication program is among the most
influential factors in the successful implementation of an M&A. Other determining factors are aspects
of the external corporate environment, the formalization of the decision-making process and the
consequentiality of the M&A.
Research limitations/implications – More empirical studies are needed to replicate and extend
our study by examining variables not included here. Moreover, it would be particularly interesting to
conduct similar studies in other countries, where the M&A practice is still young (i.e. newly accepted
EU countries).
Practical implications – Results show that the appropriate communications strategy is the area
that can significantly improve the odds of success in post-merger integration. In addition, our findings
might be of importance to newly accepted EU member countries as they are likely to attract a wave of
M&As in the coming years.
Originality/value – The paper explores a range of factors and investigates their effect on the
successful implementation of M&As. Few studies have empirically examined such a combination of
factors on M&A success using a relatively large sample of acquisitions.
Keywords Communication, Acquisitions and mergers, Business environment, Organizational change
Paper type Research paper

Management Decision
Vol. 43 No. 2, 2005
pp. 236-255
q Emerald Group Publishing Limited
0025-1747
DOI 10.1108/00251740510581948
1. Introduction
Mergers and acquisitions (M&As) have been at the center of management research for
at least two decades. They are increasingly seen by firms as a relatively fast and
efficient way to expand into new markets, to acquire new competences, to create
economies of scale, to globalize, to spread the risk or even to dominate existing
markets. Yet their success is by no means assured. Despite the enormous body of
prescriptive research outlining what to do to succeed in M&As recent empirical
research shows that between 50 and 75 percent of M&A fail to meet the anticipated
purpose. The list of possible reasons seems to be endless including such factors as
unrealistic expectations, poor planning, talent lost or mismanaged, poor
communication, cultural clashes, changing external environmental conditions,
integration difficulties etc. (Schuler and Jackson, 2001; Brouthers et al., 1998;
Pablo et al., 1996; Bryson, 2003; Kerr, 1995; Burns and Rosen, 1997a; Cartwright and The role of
Cooper, 1995; Risberg, 1997; Chatterjee et al., 1992; Griffith, 2000). broader context
Despite the significant research interest, due to the complexity of these
organizational events, our understanding of the antecedents of successful M&As is
still incomplete. This can be partly attributed to the fact that researchers tend to take a
partial view at the phenomenon. With few exceptions (Kusewitt, 1985; Larsson and
Finkelstein, 1999; Hunt, 1990) most of the existing research focuses on selected 237
domains of interest while paying lip attention to other potentially influential domains.
In addition, the largest part of the existing research is based on in-depth studies of a
very small number of cases (Bryson, 2003; Capron and Mitchell, 1997). The results of
this body of research despite their profound significance cannot lead to generalizable
conclusions.
The present study aims to fill that gap by adopting a more holistic approach. Our
approach differs from traditional research efforts in the field in four ways:
(1) It focuses on the successful implementation of the M&A as opposed to more
ambiguous criteria such as accounting or market returns.
(2) It simultaneously examines a range of factors that have been identified as
important in previous research (e.g. characteristics of the external business
environment, the characteristics of the M&A decision itself, the characteristics
of the acquiring company, as well as the characteristics of the communication
program).
(3) It brings fresh empirical evidence from outside the USA or UK context where
the majority of published research comes from.
(4) It is based on a comparatively large sample of 72 M&As. We have collected
these data through a study based on both primary data (i.e. questionnaire
completion, interviews, internal document study) and secondary data (i.e. press
reports).
The rest of this paper is organized as follows. In Section 2, we review the literature and
develop hypotheses. Section 3 describes our methods. Section 4 describes the
measurement of variables. Section 5 discusses our results and Section 6 and 7 present
our concluding remarks and explore their implications, limitations and possible
directions for future research.

2. Background and hypotheses

Research on M&As has grown exponentially over the past decade. It is therefore
understandable why researchers from a broad range of disciplines are attempting to
approach the M&A phenomenon. Hunt (1990), Larsson and Finkelstein (1999) and
others have attempted to classify the studies on M&As, according to the discipline
from which they originate, as follows:
(1) economists and finance scholars;
(2) strategic management scholars; and
(3) behavioral scientists.
In the following a brief analysis of the main properties of each of these streams of
research is attempted.
MD Economists and finance scholars. Researchers in this stream (Hall, 1979; Mahajan
43,2 et al., 1994) sustain that M&A can add value to a company and maximize its market
share and profitability, through size (economies of scale) and market control (higher
market share, lower dependency). Their research hypotheses are tested using mostly
accounting based and/or stock-market based measures. Part of this research stream
explores the motives to M&A (Pablo et al., 1996; Brouthers et al., 1998; Hunt, 1988).
238 (1) Strategic management scholars. Researchers in this stream mostly study issues
relating to the method of diversification, focusing on the consistency of the
M&A to the business strategy (Clemente and Greenspan, 1998; Clarke, 1987;
Ramaswamy, 1997). A second line of research (Fritzson et al., 2000; Ashkenas
and Francis, 2000; Rifkin, 1998; Fisher, 1998), focuses on the process of the
M&A (e.g. selection of target, successful implementation etc.). Finally, a large
part of this body of research offers prescriptive advice on making
successful M&As (Marks, 1997; Anslinger and Copeland, 1996; Gall, 1991;
Fairfield, 1992).
(2) Behavioral scientists. This research stream mainly deals with two levels of
analysis. The first is that of corporate culture (Schraeder and Self, 2003;
Appelbaum et al., 2000b; Burns and Rosen, 1997a, b, c; Bijlsma-Frankema, 2001;
Chatterjee et al., 1992; Griffith, 2000). Researchers mainly focus on such topics
as the similarities/differences in culture and offer prescriptive advice on how to
merge different cultures. A second line of research explores the impact of
M&As on such subtle issues as personnel morale and career development
(Nikandrou et al., 2000; Kerr, 1995; Bourantas and Nicandrou, 1997; Appelbaum
et al., 2000a).

2.1 Creating a “holistic framework”

Undoubtedly, this fragmentation in research goals and output has created a number of
barriers in our aim to conduct more integrative research on the M&A phenomenon.
Unfortunately, it seems that we still fail to fully understand the M&A phenomenon and
part of this problem can be attributed to the nonintegrative nature of existing research.
We will use a different conceptual lens to look at M&As and try to reach some type
of conceptual synthesis. According to past research, the successful implementation of
an M&A is influenced by a multitude of factors (i.e. strategic, economic, and
behavioral). These can be located in the external corporate environment (e.g. hostility,
technological turbulence), the characteristics of the M&A itself (e.g. consequentiality,
premium paid), the characteristics of the acquiring company (experience, relative size,
formalization of decision-making processes) and finally the handling of human
resource aspects (e.g. communication program, frequency of communication,
percentage of employees leaving the company). In the following paragraphs we look
at each conceptual domain, we describe the main results of existing research and
advance specific hypotheses to be tested.
2.1.1 Context variables. Environmental hostility. It is particularly important for
companies to adapt to or even dictate the developments in their environment.
Competitors’ reactions, as well as the constantly evolving business environment are
apt to create problems and demand actions. For example, the tendency of companies to
expand internationally results in more global M&As, while technological
advancements may result in more M&A agreements, since they represent useful tools The role of
for companies trying to keep up with technological advances (Marks, 1997). broader context
Managers should bear in mind that environmental changes may determine the
success or failure of the M&A itself. An M&A often detaches the attention of top
managers from normal business, as well as from the changes in the business
environment (Clemente and Greenspan, 1998; Gall, 1991). This may prove risky in
cases of highly competitive or even hostile markets, where competitors will attempt to 239
take advantage from the company’s temporary inertia (Gall, 1991). Competitors are
seeking to benefit from any temporary inertia, by taking up any dissatisfied clients
(Fritzson et al., 2000) or even hiring the most competent managers of the new, merged
company. Never should the attention be misguided away from competition (Clemente
and Greenspan, 1998). Moreover, in a highly competitive environment, an oncoming
M&A, if known, can take the form of an auction, as many companies may get in,
offering high premiums, just to raise the price of the agreement (Hitt et al., 2001).
H1. Increased hostility in the business environment is negatively related to the
successful implementation of an M&A.
Technological change. One of the many reasons why companies engage in M&As is to
acquire new products or to improve their new product development capability (Hitt
et al., 2001; Mahajan et al., 1994). However, in several instances new products may
quickly become obsolete before the acquiring company can incorporate them in its
product portfolio. This is particularly true in cases of rapid technological change or
even in cases where companies decide to downsize headcount in an effort to reduce
costs (Chaudhuri and Tabrizi, 1999; Bower, 2001).
Moreover, cost cuttings in the R&D department often follow a M&A, due either to
increased corporate expenses or to the expectancy that the M&A itself will provide for
the necessary innovation (Hitt et al., 2001). This can prove quite risky during periods of
intense technological change, because competitors may not exercise the same inertia
(Clemente and Greenspan, 1998).
H2. Intense technological changes in the external environment will be associated to
less successful implementation of an M&A.

2.1.2 M&A characteristics. Consequentiality. A decisive moment in the whole M&A

process is the selection of the target (Hubbard, 2001; Clemente and Greenspan, 1998;
Hitt et al., 2001). At this stage, benefits and risks from the M&A should be assessed
and the magnitude and consequentiality of changes should be evaluated. Viscio et al.
(1999) have stressed the importance of full understanding, both by the top management
team and the stockholders of the benefits and the risks of an M&A, before the
agreement. M&As should not be seen as short-term corporate crises, but rather as
long-run processes of business change, with broad direct and indirect consequences on
all stakeholders (Cartwright and Cooper, 1995). Full understanding of the expected
benefits and risks helps to better understand and plan for the required changes and
therefore contributes to a smoother transition to the new conditions and a higher
chance of fewer problems during implementation.
H3. Ex ante understanding of the consequences of the M&A (consequentiality), will
be positively associated to successful implementation.
MD Price/premium. High premiums for acquisitions are generally considered to be
43,2 negatively related to the success of the M&A (Sirower, 1997). This occurs because even
with the right strategy, estimated synergies are hard to accomplish. Sirower argues
that in cases where the premium exceeds 25 percent, the company assumes a
significant risk. Other researchers argue along similar lines (Clemente and Greenspan,
1998; Hubbard, 2001).
240 H4. Higher premiums are associated with less successfully implemented M&As.

2.1.3 Firm characteristics. Experience. As M&As are usually very complex and
demanding processes, they result in unique (positive or negative) learning experiences
(Hitt et al., 2001). It has been argued that experience gained by top management from
previous M&As, can contribute to the success of subsequent agreements (Bruton et al.,
1994; Viscio et al., 1999; Appelbaum et al., 2000a; Hitt et al., 2001). Experience from
previous M&As is particularly important in the case of distressed firms (Bruton et al.,
1994).
H5. The more experienced the firm is, the greater its chances of implementation
success.
Decision-making processes formalization. It seems to be indispensable to have a clear
implementation strategy before proceeding to an M&A (Viscio et al., 1999; Clemente
and Greenspan, 1998). An ex-ante well planned M&A process, based on corporate
needs and the definition of financial and strategic objectives sought, usually leads to a
more effective post-merger implementation (Viscio et al., 1999). Decisive role towards
this objective may play the internal organization, structure, systems and processes of
the company itself (Hunt, 1988). Key among these may be the formalization of the
internal processes of the acquiring company, a variable that can be used as a proxy
measuring the extent to which the acquiring company is internally well organized. If
this is the case, then we expect successful implementation of M&As.
H6. Increased formalization of the decision-making processes of the acquiring
company leads to more successful implementation of the M&A.
Relative size. Several researchers have studied the impact of relative size on the
success/failure of M&As (Larsson and Finkelstein, 1999). It is hypothesized that
the greater the size of the acquirer in comparison to the acquired the smoother the
implementation process, and the lesser the post-merger integration problems. Another
line of research focusing on synergies posits that the larger the size of the acquired
company in comparison to the acquirer the more managerial attention is granted and
the higher the possibility of realization of potential synergies (Diven, 1984; Ravenscraft
and Scherer, 1987). However, in the majority of studies empirical results are mixed and
in several cases no statistical significant relationships have been found (Bruton et al.,
1994; Viscio et al., 1999).
H7. The greater the relative size of the acquiring to the acquired company the more
successful the implementation of the M&A will be.

2.1.4 The communication program. The management of human resources proves more
and more important for the outcome of an M&A (Marks, 1997). M&As are not just
financial transactions, but rather processes which may significantly affect the working The role of
lives of people (Cartwright and Cooper, 1996). Oftentimes, employees are overwhelmed broader context
by stress, fear and anxiety about their own career path (McBain, 1999; Griffith, 2000).
This may result in reduced productivity, increase of absenteeism, low job satisfaction,
resistance to change, defeatism, and a general negative behavior (Nikandrou et al.,
2000). This situation has been characterized as merger syndrome (Marks, 1997). As the
human side of M&As is often disregarded this is one of the main reasons of M&A 241
failure (Appelbaum et al., 2000a).
The handling of employee resistance to change is considered of great significance in
the successful implementation of the M&A (McBain, 1999). As Schweiger and DeNisi
(1991) suggest, communication problems can undermine the commitment required for
effective implementation of the M&A. A systematic effort is required to approach and
inform employees and to create an internal climate of fairness (Fairfield, 1992). The
communication program could be vital in the success of the M&A (Bryson, 2003; Smith
and Hershman, 1999; Gall, 1991). The appropriate communication policy is vital in
bridging the differences in culture (Smith and Hershman, 1999; Appelbaum et al., 2000a).
A poor communication program may create significant problems and may lead to the
failure of the M&A (Marks, 1997; Bourantas and Nicandrou, 1997; Hubbard, 2001).
Communication aspects such as honesty (Hubbard, 2001; Appelbaum et al., 2000a;
Burns and Rosen, 1997b; Nikandrou et al., 2000), consistency (Hubbard, 2001; Clemente
and Greenspan, 1998), frequency (Hubbard, 2001; Appelbaum et al., 2000a; Burns and
Rosen, 1997b), and management reliability (Nikandrou et al., 2000) have been the focus
of previous work.
Therefore, researchers recommend that companies create early on in the process a
flexible and comprehensive communication program and communicate with
organizational members as soon as possible about the impact the integration will
have on them.
H8. The existence of a communication program significantly contributes to the
successful implementation of an M&A.
The point in time the communication program has been designed. The effort to
effectively communicate to various stakeholders should be among the top priorities
following an M&A (Clemente and Greenspan, 1998; Gall, 1991). The announcement of
the deal usually increases employee uncertainty and raises questions (Hubbard, 2001;
Risberg, 1997). Mistakes, which may negatively affect the subsequent integration
process, can be made at the very early stages of the process. Such mistakes may
include the briefing of employees on the M&A by outsiders (Clemente and Greenspan,
1998). Companies should not overlook that the first impression could be of vital
significance (Appelbaum et al., 2000b). Failure to quickly communicate with employees
could result in the spreading of sometimes-unfounded rumors, while anxiety increases
and may lead to negative attitudes towards the M&A.
Implementation success, to a large extent, may depend on the effective
communication from the first minute of the announcement of the deal (Cartwright
and Cooper, 1996). This leads researchers to argue that the communication program
should be designed before the closure of the deal, always having in mind the
characteristics of the personnel, the corporate culture and the forthcoming changes
(Gall, 1991; Cartwright and Cooper, 1996). Enough time and resources should be
MD devoted to the preparation of the communication program, as the information should
43,2 be timely, accurate, continuous, and reach all audiences at the same time (Burns and
Rosen, 1997a; Clemente and Greenspan, 1998).
H9. The design of the communication program before the closure of the deal could
be positively related to the successful implementation of the M&A.

242 Frequency of communication. An M&A potential negative consequences to employees

have already received enough empirical attention (Cartwright and Cooper, 1996;
Appelbaum et al., 2000a; Marks, 1997; Nikandrou et al., 2000). Cultural differences can
accentuate these problems (Chatterjee et al., 1992). Increased frequency of
communication could offer answers to pressing employee questions (Clemente and
Greenspan, 1998; Hubbard, 2001). This could lead to the reduction of fear (Appelbaum
et al., 2000a), to the creation of a better working climate (Viscio et al., 1999), to better
understanding of the cultural differences (Gall, 1991), and to the creation of a climate of
mutual trust between employees and top management (Nikandrou et al., 2000).
Increased frequency of communication could also contribute to the creation of a
common and clear vision (Gall, 1991; Bijlsma and Frankema, 2001).
H10. Increased communication frequency to employees after an M&A, leads to the
increased success in the implementation process.
Percentage of employees leaving the company. The increased uncertainty following an
M&A, could lead in the loss of the best of employees. If we accept the prevailing view
that employees are the most valuable resources of a company, their loss might impact
negatively its competitiveness and long-term viability (Ulrich, 1998). This could be
mostly true in high technology industries (Chaudhuri and Tabrizi, 1999; Bower, 2001).
H11. The higher the percentage of employees voluntarily leaving the company, the
less successful the implementation of the M&A.
Figure 1 presents an integrative model of the above-discussed factors influencing the
M&A implementation success. Taking this broad perspective, we believe it is possible

Figure 1.
An integrative model of
the influence of broader
context on the successful
implementation of an
M&A
to integrate employee, external environmental, organizational and strategic factors The role of
that may influence outcome-performance variables. Taken individually, none of those broader context
factors is new to the existing literature. However, by bringing them all together in an
integrative framework we will attempt a synthesis of all the abovementioned
conceptual domains. Our aim is to test this integrative model by studying a large
number of actual M&As. We describe our methodology in the following section.
243
3. Methods
3.1 Unit of analysis
This study focuses on M&As made by Greek companies, during the period 1997-1999.

3.2 Data collection

Data were collected through a combination of personal interviews and use of archival
information. All respondents were top managers of the acquiring company (i.e. CEOs,
CFOs etc.). All interviews were conducted in the working space of the respondents, and
they usually lasted from two to four hours.

3.3 Sample
The population from which our sample was extracted is composed from all the Greek
companies that proceeded in merger or acquisition from 1997 to 1999. Joint ventures,
and participation of less than 51 percent in the company’s capital are excluded. Thus,
the population or the study consists of 143 Greek companies drawn from 14 industrial
sectors. Some of those companies were engaged in more than one M&A during this
period, raising the total number of M&As to 243. We decided to study only one M&A
per company. In total 72 companies participated in our research (approximately 50
percent of the population of active companies). This percentage is high enough to allow
us to believe that our conclusions could be generalized for the population.

3.4 Reliability and validity of the data

A study based on participant recall, though the dominant method of studying decision
processes has inherent limitations (Bouchard, 1976; Huber and Power, 1985; Kumar
et al., 1993). A number of procedures have been suggested to help reduce their impact,
including the use of multiple informants (Kumar et al., 1993). Despite this, even these
methodologies do not guarantee objectivity. The nature of our research (in-depth study
of one M&A in each company, use of archival data), the idiosyncrasies of our sample
(i.e. existence of few key-informants in each M&A), as well as the enormous amount of
effort to obtain even a single informant to discuss in-depth often delicate matters like
M&As, precluded us from using more than one informant per M&A and aggregating
their responses.
Nevertheless, we followed several tactics in our attempt to alleviate possible biases
(Huber and Power, 1985; Kumar et al., 1993), First, archival records documenting the
process and its characteristics were collected prior to our main interview. Second,
particular caution was exercised to minimise distortion and memory failure problems.
This was attempted by selecting recently taken M&As, by interviewing only major
participants (Kumar et al., 1993), by cross-checking interview data against other
sources, and by using additional informants in cases of incomplete information.
Finally, the willingness and sincerity with which top managers participated in the
MD research and the interest they showed during the interviewing process, provide a
43,2 sufficient reason to believe in the face validity of their responses.

4. Variable measurement – reliability issues

In the present study we attempted to use well-known and tested measures of the main
variables when possible. This would ensure the reliability and validity of the variables
244 in the research. In the following sections we present the measurement of variables and
discuss their reliability.

4.1 Measurement of contextual variables

Two variables were used. The first, measures the environmental hostility by using
three seven-point scales: the degree of environmental riskiness, stressfulness and
dominance over the company. This is a similar scale to that used by Khandwalla
(1977). The resulting reliability coefficient is satisfactory ða ¼ 0:77Þ and is close to the
reliability coefficient reported in the original research.
The second variable measures technological turbulence by using seven-point
Likert-type scales with options ranging from (1) completely disagree to (7) completely
agree. The speed of technological change, the opportunities this offers, the possibility
of prediction, the possibility to develop new products/services, and finally the general
importance of the change for the sector in which the company functions are the
parameters taken into consideration. The reliability coefficient ða ¼ 0:86Þ of the
resulting five-item scale is very good.

4.2 Measurement of M&A characteristics

4.2.1 Consequentiality. It measures the extent to which the company knew the
“consequences” of the M&A using a Likert-type seven-point scale employing an
agree/disagree format. Similar scales were used in studies of strategic decision-making
(Hickson et al., 1986).
4.2.2 Premium. It measures the premium paid for the M&A. A seven-point scale
was used with options:
(1) over 50 percent lower than expected;
(2) 21-50 percent lower than expected;
(3) up to 20 percent lower than expected;
(4) equal to expected;
(5) up to 20 percent higher than expected;
(6) 21-50 percent higher than expected; and
(7) over 50 percent higher than expected.

4.3 Measurement of firm characteristics

4.3.1 Relative size. It is calculated using the ratio of the number of employees of the
acquiring company to those of the acquired (Diven, 1984).
4.3.2 Experience. It measures the number of M&As conducted by the acquiring
company prior to the specific M&A that we studied (Bruton et al., 1994; Hunt, 1988).
4.3.3 Formalization of decision-making. It is a composite variable consisting of three
seven-point scales measuring the degree of formalization, i.e. the existence of certain
rules/procedures to face problems, the devotion in applying those, as well as the The role of
appointment of particular persons to deal with problems that may arise. The Cronbach broader context
a reliability of the resulting three-item scale ða ¼ 0:70Þ is satisfactory.

4.4 Measurement of communication program characteristics

4.4.1 Communication program. It was measured by a dummy variable recording
whether the company had a written internal communication program or not. 245
4.4.2 Time. Since relevant research stresses the critical importance of timing in the
creation of the communication program (Cartwright and Cooper, 1996; Clemente and
Greenspan, 1998; Appelbaum et al., 2000b) we used a dummy variable to record
whether the communication program was designed before or after the deal.
4.4.3 Communication frequency. Following Viscio et al. (1999) and Gall (1991) we
incorporated a variable calculating how many times the company communicated with
the personnel during the first year after the agreement.
4.4.4 Percentage of employees leaving the company. Since relevant literature claims
that retaining employee talent may be crucial in postmerger integration success (Kay
and Shelton, 2000), we measured the percentage of employees who voluntarily left the
company after the agreement.

4.5 Performance measurement

4.5.1 Degree of successful implementation of the M&A. The majority of research on
M&As implicitly or explicitly deals with the issue of performance. Previous researchers
have used such measures as return on assets (Ramaswamy, 1997; Kusewitt, 1985) to
assess the success of an M&A. However, others have argued that researchers should go
beyond studying mere financial outcomes; especially if we take into account that
managers’ expectations should go beyond short-term financial effects. Several
researchers have criticized this over-reliance on accounting-based and/or stock return
measures of acquisition performance and claim that they are subject to significant error
(Larsson and Finkelstein, 1999). This can partly be attributed to the fact that those types
of measures of M&A performance pay little attention to other influences on M&A
success, such as synergy realization, organizational integration, and successful
implementation.
Responding to this need we decided to adopt a more holistic measure of success,
simultaneously examining both financial and non-financial indicators. To assess the
implementation success of the M&A, we measured the extent to which management
expectations were effectively materialized or not. In this assessment, a wide range of 12
issues is covered (i.e. variation in profits, sales, market share, stock price, borrowing
ability, capital cost, finance cost, investment opportunities, competitive position, R&D,
innovation and personnel development possibilities). For each of the above-mentioned
issues respondents were asked to rate, using a seven-point scale, the extent to which
their initial objectives were successfully implemented (1 ¼ low degree, 7 ¼ high
degree). The reliability coefficient of the composite variable that resulted is more than
satisfactory (0.87).
Our approach in terms of measurement is similar to Larsson and Finkelstein (1999)
who instead of successful implementation relied on synergy realization as their
dependent variable. Our view is that approaching M&A performance in terms of
successful implementation avoids the problem of studies capturing only anticipated
MD performance because the emphasis is on benefits that are actually realized after the
43,2 deal is completed.

5. Results
Table I reports the means, standard deviations, correlation coefficients and reliabilities
for all variables assessed in this study. A quick view at the correlation of the successful
246 implementation variable with the rest of the variables reveals that five out of the
Eleven are statistically significant at a 5 percent level, or less. Of particular importance
(99 percent significance level) appears to be the role of the communication program as
two out of the five statistical significant variables (namely existence of a
communication program and communication frequency), fall in this category.
However, simple correlations are one-to-one relationships. It is more reliable to test
these initial findings by using multiple regressions as the primary statistical
procedure, treating successful implementation as the dependent variable. The results
of the regression analysis are presented in Table II. The adjusted R 2, is highly
significant, R 2 adjusted ¼ 0:307:

5.1 Discussion of results

5.1.1 Context variables. Environmental hostility appears to be, the most important
factor related to the successful implementation of the M&A. It shows a negative
relation between the extent of environmental hostility and the success of the M&A.
This result verifies our research hypothesis and is in accordance with the findings of
past research arguing that the more dynamic/hostile the external environment the
higher the possibility of post merger implementation problems, due to competitor
moves and changes in the macro environment (Clemente and Greenspan, 1998; Gall,
1991; Fritzson et al., 2000; Chaudhuri and Tabrizi, 1999).
The degree of technological change does not appear to have a statistically
significant effect.
5.1.2 M&A characteristics. The positive and statistically significant relation
between the ex ante understanding of the changes an M&A would bring about (i.e.
consequentiality) and the successful implementation of the M&A, confirms the
relevant hypothesis. This seems to be of particular significance to companies
performing M&As in countries like Greece, since it partly covers for their lack of
experience and offers them the ability to plan ahead and get prepared for the
subsequent changes.
Our results do not support any statistical significant relation between the premium
paid for the M&A and its successful implementation. Other researchers have resulted
in similar conclusions (Viscio et al., 1999; Kusewitt, 1985). As a matter of fact, Smith
and Hershman (1999) accentuate the fact that it is not the price paid for an acquisition,
but how to handle the implementation process that is of more importance.
5.1.3 Firm characteristics. Previous experience does not emerge as one of the
statistically significant antecedents of effective implementation. Despite the fact that
conventional wisdom posits that we should expect experienced companies to
outperform inexperienced, the relevant hypothesis was not confirmed. Similar research
(Hunt, 1990; Hunt, 1998; Bruton et al., 1994) has reported previous experience to be
generally non-significant with the exception for special conditions (e.g. extremely
hostile environments or in cases of M&As of distressed firms).
 Context M&A Communication program Successful
variables characteristics Firm characteristics variables implementation
No.
Standard of
Variables Mean deviation a items 1 2 3 4 5 6 7 8 9 10 11 12

1. Environmental
hostility 3.34 1.14 0.77 3 1.0
2. Technological
turbulence 4.41 1.5 0.87 5 0.057 1.0
3. Consequentiality 5.75 1.33 N/A N/A 0.045 0.237 1.0
4. Price/premium 4.22 1.04 N/A N/A 0.002 2 0.034 0.265 1.0
5. Experience 2.33 2.75 N/A N/A 2 0.043 0.047 0.046 2 0.248 1.0
6. Formalization of
decision making 5.07 1.16 0.7 3 0.020 0.212 0.014 0.275 2 0.166 1.0
7. Relative size 5.9 14.29 0.75 2 2 0.015 2 0.030 2 0.072 2 0.063 0.325 2 0.043 1.0
8. Communication
program 0.63 0.49 N/A N/A 2 0.061 0.198 0.223 0.139 0.021 0.237 0.074 1.0
9. Point in time the
communication
program was
designed 0.15 0.36 N/A N/A 2 0.094 0.199 2 0.007 2 0.092 0.132 0.231 0.272 0.329 1.0
10. Communication
frequency 1.73 14.98 N/A N/A 2 0.142 2 0.112 2 0.175 2 0.080 2 0.073 2 0.152 2 0.073 2 0.141 2 0.190 1.0
11. Percent
employees
leaving the
company
(percent) 0.05 0.07 N/A N/A 0.066 2 0.006 0.034 0.145 2 0.191 0.037 2 0.106 0.055 0.160 2 0.020 1.0
12. Successful
implementation 4.12 1.03 0.87 12 2 0.334 0.180 0.225 0.046 2 0.116 0.213 0.031 0.251 2 0.094 0.219 0.125 1.0
Notes: Decimals of correlation coefficients were omitted. For coefficients greater than r . 0:198; p , 0:05: For coefficients greater than r . 0:275;
p , 0:01: For coefficients greater than r . 0:35; p , 0:001

variables assessed in this

deviations, reliabilities,
Means, standard
broader context

study ðn ¼ 72Þ
and correlations for
247

Table I.
The role of
MD Dependent variable: successful
43,2 implementation
Independent variables b t

Environmental hostility 20.369* 2 3.640

Technological turbulence 0.141 1.308
248 Consequentiality 0.259** 2.305
Price/premium 20.178 2 1.561
Experience 20.121 2 1.093
Formalization of decision making 0.281*** 2.484
Relative size 0.200† 1.821
Communication program 0.325* 2 2.689
Time 0.159 1.375
Communication frequency 0.182† 1.662
Percentage of employees leaving the company 0.202† 1.927
R2 0.415
Adjusted R 2 0.307
Table II. F 3.862*
Regression results Notes: *p , 0:001; **p , 0:05; ***p , 0:01; †p , 0:10

Before 1997 M&As were not a widespread phenomenon in the Greek context. However,
hundreds of M&As took place in less than four years (1997-2000). Presumably, one can
claim that even the more active companies in terms of merger activity did not have
enough time to fully assimilate previous experience.
The extent of formalization appears to be statistically significant. Formalization is
one of the structural characteristics and can be seen as a proxy for more effective
internal structure. The positive relation between the extent of formalization and the
successful implementation, confirms the original hypothesis and is in line with relevant
literature (Pablo et al., 1996; Clemente and Greenspan, 1998; Hubbard, 2001). It appears,
that given the lack of experience of Greek companies, those having more formalized
processes (i.e. were better organized) were more effective in setting priorities and better
managing the post-merger integration process.
The relative size turns up statistically significant at a 10 percent level of significance.
This is in line with previous research (Hunt, 1988) arguing that the increased size of the
acquiring company makes the post-merger integration comparatively “smoother”.
5.1.4 Communication program characteristics. The existence of an integrated
communication program does come out as one of the most significant factors
contributing to the successful implementation of the M&A. Relevant research also
confirms this finding by supporting the view that the communication program is
among the most important tools to invert the negative atmosphere in the personnel
(Fairfield, 1992) to induce team spirit through a common vision (Smith and Hershman,
1999), and generally to end up in a smooth and successful implementation process
(Hubbard, 2001; Appelbaum et al., 2000b; Habeck et al., 2000).
The time the communication program was designed (i.e. before or after the merger)
appears to be insignificant. Consequently, the research hypothesis is not confirmed.
This contradicts previous research that had stressed the critical importance of drafting
the communication program, even before the closure of the deal (Cartwright and
Cooper, 1996; Clemente and Greenspan, 1998; Appelbaum et al., 2000b). Of note is that
only 15.3 percent of the companies in our sample created the communication program The role of
before the formal agreement, while 47.2 percent did so after the agreement. broader context
The third communication variable, namely the communication frequency, appears
to be marginally significant at a 10 percent level of significance. This indicates a rather
weak, although interesting, positive relationship between communication frequency
and successful implementation of the M&A. This finding offers some support to
previous research arguing for the importance of frequency of communication in 249
creating a smooth working climate (Viscio et al., 1999), in understanding cultural
differences (Gall, 1991), and in creating a common vision (Gall, 1991).
Finally, the percentage of employees leaving the company has also a marginally
statistical effect on the successful implementation of the M&A. This result is
counterintuitive and is not in line with conventional wisdom as well as findings from
other settings. According to these findings retaining talent is a critical ingredient in
M&A success (Kay and Shelton, 2000). Therefore the higher the employee turnover
after an M&A, the higher its failure rate (Ulrich, 1998).
Surprisingly, in the Greek context it seems that the higher the percentage of
employees voluntarily leaving the company the more successfully the merger is
implemented. Although counterintuitive, this can be explained by the fact that in
Greece employment laws are very strict prohibiting companies from laying off more
than 2 percent of their employees per month. Moreover, due to socio-cultural reasons
Greek companies appear generally hesitant to proceed to massive lay-offs in order to
achieve cost reduction. In addition, unions have enough bargaining power to force
corporations wishing to preserve their corporate image to think carefully before
resorting into employee headcount downsizing.
Our descriptive results are quite indicative in verifying the above. Approximately
70 percent of companies in our sample did not resort in any form of employee
downsizing and another 17 percent fired from 1 to 5 percent of their employees. In that
sense it is rather difficult for companies to achieve significant cost reductions from
synergies at the personnel level. As a result of the above, a relatively low ratio of
voluntary resignation after the M&A, seems to be perceived as positive by Greek
companies.

6. Discussion – conclusions
To conclude, it should be pointed out that the current paper offers some insight on the
M&A phenomenon in Greece, a country that has experienced an unusually high
merger mania during the second half of the past decade and the early years of the new
millennium. Our results provide support for an integrative perspective explaining the
successful implementation of M&As. By approaching implementation success as a
multidimentional construct incorporating both financial and non-financial
performance we may be able to more directly capture what really takes place in an
M&A. This departs from conventional research in the area, which is mostly based on
accounting and stock-market measures of performance. These could be problematic
especially if we want to explore such “soft” aspects as employee resistance, internal
communication etc.
However, one might say that among the potential limitations of the present study
that warrant discussion is the subjective nature of some of its measures. Another
potential limitation is that the sample is representative of the M&As of Greek
MD companies between 1997 and 1999 and cannot be generalized to other countries or time
43,2 periods. Despite these limitations, the main contribution of the study is that it focuses
on a range of internal and external contextual factors and investigates their effect on
the successful implementation of M&As. Few studies have statistically examined such
a combination of factors on M&A success using a relatively large-scale sample of
acquisitions (Larsson and Finkelstein, 1999).
250 Among the main findings is that the success of an M&A cannot be attributed solely to
any one of the above sets of characteristics. Managers are advised to pay attention to both
internal and external contextual factors. Prevalent among the internal factors is the
existence of a communication program, and to a lesser extent the frequency of
communication and percentage of employees leaving the company. The importance
of internal communication corroborates the findings of previous research (Nikandrou et al.,
2000) and shows that the appropriate communications strategy is the area that can
significantly improve the odds of success in post-merger integration. Although our data do
not speak directly to that issue, we can infer that by means of a successful internal
communication program companies can fight resentment, hostility, dissatisfaction and
alienation of employees, which result in problematic implementation of the deal.
The above finding is of significant importance to managers in Greece since
according to our descriptive statistics 38 percent of the companies in our sample had no
formal communication program. Furthermore, on the average companies in our sample
were not satisfied with their internal communication effort. Forty-five percent of the
companies already having a communication program expressed the view that if given
the opportunity again, they would have paid much more careful attention to their
internal communication. We may attribute the above to the lack of experience or lack of
elaborate HR practices on the part of Greek companies. This did not allow for the
creation of a communication program before the agreement, as companies could not
accurately predict their actual communication needs. However, if we adopt a different,
more intriguing view, we may claim that it was not their inexperience with M&As that
had lead them into not creating a communication program. It was the fact that top
managers were caught in a “merger mania” and they were more “preoccupied with
closing the next deal”, rather than trying to make the current M&A a success, i.e. by
effectively communicating internally.
A second variable begging for our attention is the formalization of decision-making.
Our results suggest that the higher the formalization the higher the implementation
success. If we consider this variable as a proxy for comprehensiveness of internal
systems and processes then it appears that companies with more elaborate systems
and processes are closer to reaping the benefits of successful implementation. In other
words managers should pay attention to the finding that success in an acquisition
depends significantly on the presence of the proper structural and processual
mechanisms to help in a smother implementation process. Existing research on M&As
has given this factor scant attention. This finding acquires particular significance if we
take into account that recent research in Greece has shown that Greek firms experience
less formalization in their decision-making and planning activities in comparison to
multinationals operating in Greece (Bourantas and Papadakis, 1996; Spanos et al.,
2001). This lack of elaborate systems may force Greek companies to approach M&As
in a more “intuitive” rather than rational manner.
 Environmental hostility manifests itself as the most statistically significant factor, The role of
bearing a negative effect on the implementation of an M&A. Managers in such broader context
environments should be twice as cautious in the way they approach M&As. It seems
that managers are shortsighted in seeing only the immediate benefits of an M&A in
terms of market share or specific products, while ignoring the magnitude of changes in
the external environment. These changes by themselves are more than enough to lead
the merger into failure. 251
Our findings support the view that the awareness concerning the consequences that
the M&A will bring about is among the most significant contextual factors influencing
its successful implementation. This should be of particular interest to managers, since
past research has shown that merger success directly correlates with the level and
quality of planning involved. The level of planning should relate to the anticipation
and understanding of the consequences of the M&A. Reconciling the above, it appears
that top management should pay particular attention to the manner in which M&As
are perceived and labelled at the initial stages of the bidding process (e.g. as having
high consequentiality). If managers label M&As as having significant consequences
for the organization, it seems that they can trigger such mechanisms and energize the
organization towards a more successful implementation process. However, there exists
very little knowledge on how top management may choose to manipulate the
“labelling” of M&As, and then “sell” them to the organisation.
The variable measuring relative size (size of the acquiring/size of the acquired) offer
us another fruitful point for discussion. Although marginally significant (at a 10
percent level of significance), it seems that the larger the acquirer the more successful
the implementation of the M&A. In other words managers are advised to select smaller
targets in order to be able to smoothly integrate them (i.e. what companies like Cisco
Systems mainly do).
Finally, we would like to draw management’s attention to one of the variables that
proved insignificant (i.e. past experience). This may indicate that companies are unwilling
or unable to learn from past experience. If we accept that about 50-75 percent of M&As fail,
then learning from past experience is not a simple academic recommendation, its an
imperative. Unfortunately, especially in Greece managers seemed to have been caught in a
merger-mania, trying to acquire one company after the other, thus paying lip attention to
organizational learning and experience accumulation. In an era where one of the few
sustainable competitive advantages is the ability of companies to learn quicker than
competitors, inability to learn seems to be a serious mistake.
In conclusion, three out of the four critical factors can be understood and
manipulated by the companies. The HR department directly controls one of them, i.e.
the communication program. The rest of the organization can:
(1) control the types of decision-making processes followed; and
(2) enhance its ability to overcome its mental models and clearly understand the
consequences of the M&A and react accordingly.

7. Concluding remarks-future research

Our findings provide support for a more integrative approach to studying mergers and
acquisitions. This research is another empirical step in understanding the variety of
strategic, human resources and organizational factors that influence the successful
MD implementation of M&As. Our results indicate that there is considerable value in the
43,2 simultaneous focus on all the above factors. Therefore, more empirical studies are
needed not only to replicate but also to extend our study by examining variables not
included here. Such variables might come from both the organizational level of
analysis (e.g. specific dimensions of the communication program, cultural
similarity-dissimilarity between the two companies, difference in managerial styles)
252 and the influence of various internal and external stakeholders in the post-merger
integration success (i.e. unions). In addition, researchers investigating M&As may
benefit by broadening their view of the dependent variables and study such variables
as synergy realization and/or organizational integration. We see significant future
research opportunities in efforts to create larger samples (as opposed to small-sample
case based research). Such efforts can significantly improve our knowledge of the
factors contributing to successful M&As by
(1) comparing both accounting and stock returns on the successful implementation
of an acquisition; and
(2) testing more detailed models of M&A performance.
Moreover, it would be particularly interesting to conduct similar studies in other
countries, where the M&A practice is still young (i.e. newly accepted member countries
to the EU), or even attempt a direct comparison between M&As conducted during the
merger-boom period (1997-2000) and mergers conducted after this period (i.e. 2001þ ).
Furthermore, comparative research between smaller countries like Greece and more
experienced countries like the UK might also be of interest.
Finally, the main findings of this paper may be of significance to newly accepted EU
member countries or other countries waiting for acceptance. Most of these countries are
likely to attract investment from either within or outside the EU. Moreover, their own
domestic companies are likely to try to strengthen their presence in their internal
markets by merging or acquiring competitors. Therefore, we may expect a wave of
mergers and acquisitions taking place in the next few years. Most of these countries are
in terms of size or economic development similar to Greece. Therefore the findings of
our study concerning the factors contributing to the successful implementation of
M&As might be of importance to managers in these national settings.

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Further reading
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mechanisms”, Management Decision, Vol. 35 No. 2, pp. 155-62.