A recent study indicates that companies may significantly enhance their value by adopting a slower pace in acquisition strategies. Conducted by a team led by Jerayr “John” Haleblian, a professor of management at University of California – Riverside, the research highlights the importance of spacing out acquisitions to maximize profitability. The findings were published in the Journal of Business Research and challenge traditional views on acquisition timing.
The research, titled “Experience Schedules: Unpacking Experience Accumulation and Its Consequences,” analyzed over 5,100 acquisitions undertaken by companies listed in the S&P 1500 from 1992 to 2012. It reveals that firms that extended the time between acquisitions generally enjoyed higher stock values compared to those that pursued rapid deal-making.
Haleblian explained that this extended pacing allows firms to absorb and integrate new assets more effectively. He noted, “Our findings suggest that gradually increasing the time between acquisitions can better position firms to learn and improve from each experience and thus get the most out of each buyout.” This perspective underscores the need for corporate leaders to reflect on previous deals before engaging in new ones.
The study’s authors argue that taking time to integrate new teams and resources is crucial. Rapid acquisitions often result in what they term “acquisition indigestion,” a situation where an organization struggles to assimilate new operations due to the overwhelming pace of change. By allowing for more time between deals, executives can refine internal processes and foster organizational stability.
To further corroborate their findings, the research team conducted interviews with 17 senior executives from the chemical, energy, and technology sectors. One executive highlighted the value of taking a more measured approach: “If you have fewer deals and more time in between, you can really focus on extracting the value out of that, and it’s less of a strain on the running organization.”
The implications for acquisition managers are clear. Instead of hastily pursuing new opportunities, companies should consider a more deliberate and reflective strategy. This approach not only enhances learning from past acquisitions but also positions firms for greater long-term success.
In summary, the findings from this comprehensive study suggest that a slower acquisition pace can yield significant benefits for companies, leading to improved stock performance and better integration of new resources. Organizations are encouraged to rethink their acquisition strategies in light of this new evidence, prioritizing quality and value over speed. For more information, refer to the study by Christopher B. Bingham et al, published in the Journal of Business Research.
