Acquiring Poorly Performing Companies during a Recession: Insights into Post-Acquisition Management

Abstract

At this time of recession, many companies are performing badly and some become acquisition targets. Once acquired, the General Manager needs to consider how to turn around the acquired company. Existing studies of turnarounds suggest a uniform approach to the early stages of management, but this is based on analysing stand-alone companies rather than acquired ones. Amongst acquisitions it is well known that there are different integration styles, but studies of mergers and acquisitions have not focused upon how poorly performing companies are managed. This paper asks (1) should acquired companies in poor financial health be managed as other acquired companies and (2) should they follow turnaround literature prescriptions? Using a novel mixed method approach, cluster analysis techniques reveal the existence of two distinct integration strategies for poor performing target companies, and qualitative interviews provide explanation of these findings. For General Managers this means that their strategy options should not be limited to the ‘classic’ turnaround strategies set out in the existing literature but should recognise that there are different ways to manage poor health acquisitions.