In a significant shift for corporate acquisition strategies, research from the University of California, Riverside suggests that a slower pace between acquisitions can enhance company valuations. The study, co-authored by management professor Jerayr “John” Haleblian, highlights the importance of timing in corporate acquisitions, revealing that companies spacing out these deals experience stronger performance as measured by stock value increases.
Published in the Journal of Business Research, the research titled “Experience Schedules: Unpacking Experience Accumulation and Its Consequences” examines how the intervals between successive acquisitions, referred to as “experience schedules,” impact a company’s overall performance. The findings challenge the traditional notion that rapid, successive acquisitions yield the greatest financial returns.
According to the study, companies that extend the time between acquisitions are rewarded by investors with higher stock values. Haleblian asserts, “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 shifts the focus from speed to strategic learning and integration.
The research analyzed over 5,100 acquisitions within the S&P 1500 index from 1992 to 2012. It discovered that firms that allowed more time between deals significantly outperformed those that pursued rapid acquisitions. This slower approach enables executives to absorb lessons from previous transactions and integrate new employees and assets more effectively.
Understanding the Risks of Rapid Acquisitions
The study identifies a phenomenon known as “acquisition indigestion,” where the rush to complete multiple deals overwhelms a company’s capacity to integrate new operations. Slower pacing not only fosters better organizational stability but also provides leaders with the necessary time to establish structures and processes that support newly acquired resources.
To gather real-world insights, the research team conducted interviews with 17 senior executives across various sectors, including chemical, energy, and technology. One executive noted, “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.” Such statements underscore the potential advantages of a more thoughtful acquisition strategy.
The implications of these findings suggest that acquisition managers should reconsider their approach. Rather than hastily pursuing one deal after another, firms may benefit from a more deliberate pace that allows for reflection and strategic planning. This approach could lead to greater long-term success, aligning with the study’s conclusion that slower acquisition rhythms ultimately yield higher corporate values.
As the business landscape evolves, companies are urged to prioritize learning and integration over speed. The research emphasizes that by improving acquisition strategies, firms can not only enhance their immediate financial performance but also secure sustainable growth in the future.
More information regarding this study can be found in the Journal of Business Research.
