Learning the Ropes of M&As

For business leaders, the attractiveness of mergers and acquisitions, M&A, appear to ebb and flow in the tide of economic growth and decline.

Joanna Sinclair, 04.05.2018

A critical, case specific approach matching company strategy would, however, be far more advisable than following the lead of others.

Global M&A value reached a record $1.2 trillion in the first quarter of 2018, in the wake of faster economic growth in Europe and U.S. tax reform. Although Q1 showed a slight decline in transaction volume, a peak in M&A activity has been continuing strong since 2015, with over 50 000 M&As announced worldwide annually. Before this, 2007-2008 showed similar global drive for dealmaking.

In the stock market, mirroring the behavior of other investors is jeeringly coined lemming or herd mentality; yet upsurges in M&A transactions or value are habitually applauded – and commonly considered drivers of economic growth, seldom its byproduct.

Economic growth can lead to prices skyrocketing, and even mediocre purchases appearing attractive."

“Like investment behavior in general, M&A activity is often paradoxical. Bold moves are made when business is booming,” says Eero Vaara, Professor of Organization and Management at Aalto University School of Business.

“A critical observer might point out how nonsensical this is. Economic growth can lead to prices skyrocketing, and even mediocre purchases appearing attractive. Many acquisitions involve swapping company stock, which moderates the impact of economic upturn, but nonetheless, concentrating M&As to times of economic decline would make more sense,” he points out.

Dare to say no

Vaara is the world’s most cited researcher in the field of M&A, well-known for the myriad of articles he has published in top-ranked journals. He was also recently acknowledged as the world’s leading author in interdisciplinary research concerning M&A.

When asked to name the number one lesson that leaders should learn about M&As, Vaara does not hesitate.

“Don’t do it,” he says with a laugh. “Often times the bravest, and hardest, decision regarding M&As is the decision to pull back.”

“So much work has been put into planning and negotiations that pressing forward seems inevitable. Leaders should always consider very carefully if the M&A is the best course of action, remain highly critical, and be prepared to stop even at the last minute,” Vaara asserts.

Vaara emphasizes that while leaders can most certainly learn important insights and general guidelines regarding M&As, there are no specific rules of thumb that apply to each case.

Experience from one context will not necessarily prove useful in the next M&A."

“Experience from one context will not necessarily prove useful in the next M&A. We have all heard of teams specialized in M&As that may have three or four deals under their belt that were considered highly prosperous, and then suddenly their next acquisition falls flat.”

“Context matters. Careful planning and a humble approach are imperative. Skilled leaders can anticipate and understand probable outcomes, and ways in which people may react. Negative reactions, for instance, should never be a surprise,” Vaara reminds.

He points out that while leaders often strive to create immediate enthusiasm, change resistance can be a highly positive thing.

“Resistance can be a strength that steers the company into a better direction,” he remarks.

Start integration planning as soon as possible

Vaara notes that recurrently sparking enthusiasm toward consolidation is not limited to corporations, albeit M&A trends in for instance public sector organizations often stem from political power play, not economic climate.

In Finland, a current example from the public sector is the ongoing social and healthcare reformation. In the educational sector, a noteworthy case is Vaara’s employer, Aalto University, which was established in 2010 as a merger of three major Finnish universities.

Leaders frequently have a Big Bang approach to consolidation."

“Regardless of organization type – be it commercial, public sector, or non-governmental – leaders frequently have a Big Bang approach to consolidation. They expect to finish things rapidly and see fast results. This is a mentality I recommend steering clear of. Temporality is key, and counterfactual consideration is also advisable,” says Vaara.

A key point Vaara wishes to emphasize is that integration takes considerable time. Well-led M&As may bring forth synergy, knowledge sharing, efficiency, market share, and numerous other benefits – but companies should focus on long term value creation, not fall into the trap of quarterly economy. Culture and identity take years, even decades to evolve.

Therefore, Vaara urges any organization contemplating an M&A to start integration planning as soon as possible.

“The opportunities and challenges of integration should be taken into account from day one. There are naturally different phases to M&As, but far too often companies attempt to finish one phase before even considering the rest. They first focus on due diligence, valuation and accomplishing the deal, and leave integration planning for later. This is always a mistake.”

Avoid labelling – focus on leading the way forward

In line with his advice regarding temporality, Vaara cautions against labelling M&As as success stories or failures.

“Leaders often seek ontological security, wishing to rapidly pigeonhole things as accomplishments or letdowns,” he explains.

“Yet clear cases of success or failure rarely, if ever, exist. This is a harsh message, but perhaps also a comforting one. Even though things get a rough start or you hit setbacks on the way, you can always learn from your mistakes and strive to perform better in the future,” Vaara observes.

“During the past 40 years or so, for example Finnish industry has reaped momentous benefits from M&As. In retrospect, acquiring ASEA in 1968 was a milestone deal for KONE, followed by a number of noteworthy acquisitions which helped maneuver KONE into the innovative, global market leader it is today. Yet I doubt insiders would say its many integration processes and every leader involved were straight-out triumphs,” he reflects.

A final pitfall is believing that leaders decide, while employees make things happen."

A final pitfall Vaara calls attention to is believing that leaders decide, while employees make things happen. Leaders must take a hands-on approach to integration.

“Research shows that people who have not taken part in negotiating a deal often feel a leadership void. Leaders should recognize the scope and limits of their own power and responsibility,” Vaara advises.

“Leaders must invest their time, visibly take part in integration, communicate, and be able to receive criticism. They should never flee away from responsibility. When it comes to M&As, trust, fairness, and legitimacy are all key issues us researchers like to emphasize,” he highlights.

Professor Eero Vaara has teached in Aalto EE’s Mergers and Acquisitions program. It provides you with advanced skills and tools for using M&A to accomplish your strategic objectives. The Program is aimed especially for companies applying or investigating acquisitions as a part of their growth strategy.

World-class interdisciplinary M&A research

M&As provide a plethora of phenomena for researchers to study, such as decision making, corporate finance, organizational identity, culture and change.

Interdisciplinary scientific collaboration among M&A scholars is in itself also an interesting area of study. A recent article published in the European Management Review searched for patterns of collaboration among top authors, and also ranked researchers according to one of the most sought after merits in academia: citation count.

Aalto University’s Eero Vaara received the highest acclaim in the article. According to authors Nicola Mirc, Audrey Rouzies and Satu Teerikangas: ‘Vaara is not only the most prominent M&A scholar in the network but also the author who collaborates the most with scholars from other disciplines.’

Vaara emphasizes that interdisciplinary M&A research provides frameworks and new understanding on organizational phenomena which can prove highly useful also outside the realm of research.

“In the last 10-15 years the global balance has shifted. Multinational companies originating from China for instance are actively seeking growth through M&As around the world. Power-structures and cultural differences are highly interesting areas of study, as are economic aspects of M&As, such as the astounding sums that are paid for promising startups or in the tech industry in general,” Vaara mentions.

“Research often focuses on the corporate world, but consolidation trends that peak and decline in intervals occur in every sphere of society, with comparable challenges in integration. M&A research has valuable insight to offer leaders from all organizations,” Vaara concludes.


The Mergers and Acquisitions program gives you a structured understanding of the M&A process and equips you with the tools and skills you need for succeeding in each phase of the process. Read more about the program.


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