Operating synergy and post-acquisition integration in corporate acquisitions: A resource reconfiguration perspective

Abstract

We theorize that contingent on whether acquisitions put more emphasis on realizing cost versus revenue synergy, they require different degrees of post-acquisition integration due to their different resource reconfiguration requirements. We use data from 448 US-based acquirers and 1452 domestic acquisitions to find strong support for our theoretical conjecture. On the one hand, we find that for acquisitions that emphasize cost synergy more than revenue synergy, the degree of integration exerts a linear mediating effect on acquirer performance. That is, performance increases as the degree of integration increases. On the other hand, we find that for acquisitions that emphasize revenue synergy more than cost synergy, the degree of integration exerts an inverted U-shaped mediating effect. That is, performance is highest at intermediate degrees of integration. We advance research on post-acquisition integration by first demonstrating the importance of aligning the degree of integration with the synergy rationale in acquisitions (emphasis on cost or revenue synergy) to achieve high acquisition performance. Second, we introduce a novel, replicable approach for empirically operationalizing the degree of post-acquisition integration. We contribute to the resource reconfiguration lens of dynamic capabilities by showing that firms whose managers align the intended source of value creation with their approach to reconfiguration may achieve higher performance outcomes.