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onsultants and executives involved in mergers and acquisitions (M&A) will be interested in the recently published ndings of a ten-year study into the close relationship between takeovers and executive churn. Jeffrey A. Krug of Virginia Commonwealth University and Walt Shill of Accenture, Virginia, have assembled a large volume of data in order to investigate what happens to executives following an acquisition. It makes for unsettling reading for anyone considering an M&A.
PAGE 24
STRATEGIC DIRECTION
VOL. 25 NO. 1 2008, pp. 24-25, Q Emerald Group Publishing Limited, ISSN 0258-0543
DOI 10.1108/02580540910921897
The rise in pre-merger instability in the 1990s and 2000s as compared with the 1980s is explained with reference to recent trends in competition, globalization and technology.
rm-specic knowledge that could help to make a merger a success, and this has a knock-on effect on the condence of shareholders. Currently, it is clear that too little attention is given to leadership stability in planning and executing mergers, but further analysis of Krug and Shills data will be required to pinpoint what causes the instability of merging rms in greater detail. The rise in pre-merger instability in the 1990s and 2000s as compared with the 1980s is explained with reference to recent trends in competition, globalization and technology. Japanese rms in particular have provided some real competition to USA rms in a wide variety of sectors and industry turbulence has increased with changing consumer preferences, negotiations with large multinational suppliers and a greater variety of products in the marketplace. Krug and Shill link instability among top management with these global trends in business, but again further study is required to make precise and substantive claims about the nature and implications of this link. The writers nish with a series of useful questions that their data may also help them answer in time, but that should also be considered by anyone considering the long-term consequences of an M&A. Has the rm already been acquired before? Is poor performance involved in the reasons why a rm is being divested? What is the motivation for acquisition? What is the current state of stability within the target rms top management team? Any merger is likely to be followed by an increased rate in executive churn, but serious consideration of these questions alongside clear efforts at integration and management stability may help to hinder future poor performance.
Comment
This is a review of The big exit: executive churn in the wake of M&As, by Jeffrey A. Krug and Walt Shill. Interested in the association between executive turnover and poor post-merger performance, the authors investigated more closely what happens to executives following an acquisition. They spent ten years compiling data on executive turnover in close to 5,000 M&As, and in this article present results and some initial observations. Acquisition appears to have a signicant effect on stability at the top when compared to companies who have remained static. The paper offers some insights on the practical implications of these ndings, as well as calling for further study in the area if consultants are to better predict and control long-term performance after a merger.
Reference
Krug, J.A. and Shill, W. (2008), The big exit: executive churn in the wake of M&As, Journal of Business Strategy, Vol. 29 No. 4, pp. 15-21.
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