Dynamics of Acquired Firm Pre-Acquisition Employee Reactions

Abstract

Based on a qualitative, large-scale, interview-based inductive study of eight acquisitions conducted by Finnish multinationals, this article develops a grounded model of the dynamics of acquired firm employee reactions preceding related, industrial cross-border acquisitions. In contrast to most merger and acquisition (M&A) research portraying employee reactions in times of M&A in a negative, stressful light, the present findings shed a contradictory light on this discourse. In six of the studied acquisitions, pre-acquisition employee reactions tended toward motivation rather than uncertainty. The underlying reason was that these acquisitions were perceived as opportunities instead of threats in the target firms. As a result, target firm management became proactively involved in promoting the acquisition’s success. The author terms this target behavioral responsiveness and found it to result from (a) “static” factors (partner organizational attractiveness and target cognitive responsiveness) as well as (b) “dynamic” factors (partner behavioral attractiveness and target strategic responsiveness). Intriguingly, the dynamic factors were found to have a stronger predictive impact on target behavioral responsiveness. Indeed, in two of the acquisitions, their low ranking on static factors was countered by a high ranking on dynamic factors, namely, attractive partner behaviors and a strategically responsive target. Employee reactions to a forthcoming acquisition are thus not the deterministic result of the change itself, but can be influenced through buying firm behaviors and positive future intentions as well as the target experiencing a need to be acquired. Implications for M&A research are discussed, and a model and propositions to guide future research are suggested.