Three methods for obtaining vital information before the
deal happens. If history provides any guide, many M&A
deals will fail to generate any real value for the
shareholders of the acquiring company, and a good number
will ultimately become wealth-destroying propositions.
New insights into why this happens have come from
seemingly unrelated markets, including those for used
cars, labor and insurance. Strategic management
researchers and financial economists have used these
insights to understand why some M&As perform poorly and
to identify ways that managers can cope with the
challenges presented by knowledge discrepancies across
bidders and targets. The fundamental problem lies in two
inherent features of many M&As: the acquiring company’s
struggle to value the target’s resources and the need
for the parties involved to agree on a price. pdf 2005
