In the competitive landscape of corporate acquisitions, a new study suggests that taking more time between deals may lead to improved financial outcomes. Researchers, including Jerayr “John” Haleblian, a professor of management at the University of California – Riverside, found that companies that space out their acquisitions tend to see greater increases in stock value. The findings are detailed in the Journal of Business Research.
The study, titled “Experience Schedules: Unpacking Experience Accumulation and Its Consequences,” challenges traditional beliefs regarding acquisition timing. It analyzed over 5,100 acquisitions made by S&P 1500 companies over a period spanning from 1992 to 2012. The researchers discovered that companies that extended the intervals between acquisitions were better rewarded by investors, achieving higher stock prices compared to those that pursued deals at a rapid pace.
Haleblian emphasized that allowing time between acquisitions enables firms to learn from past experiences. “Our findings suggest that gradually increasing the time between acquisitions can better position firms to learn and improve from each experience,” he stated. This approach can maximize the potential benefits of each buyout.
Acquisitions often aim to enhance profitability by incorporating new talent, technology, and market share. However, Haleblian pointed out that effective integration of new assets requires time. The research indicates that companies rushing into deals may experience “acquisition indigestion,” overwhelming their capacity to integrate new operations effectively.
Benefits of Spacing Out Acquisitions
The study highlights several advantages of a slower acquisition strategy. Companies that spaced out their deals could better absorb lessons learned, refine internal processes, and integrate new employees and resources more effectively. This approach fosters organizational stability, allowing leaders to establish supportive structures and practices for the newly acquired assets.
To gain practical insights, the research team conducted interviews with 17 senior executives from the chemical, energy, and technology sectors. 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.”
The implications for acquisition managers are significant. Rather than hastening from one deal to the next, companies may benefit from adopting a more measured approach, focusing on long-term success and the value derived from each acquisition.
The study’s findings align with a growing recognition of the importance of strategic pacing in corporate acquisitions. In a landscape where rapid deal-making has long been celebrated, this research advocates for a shift towards a more thoughtful and reflective acquisition strategy.
As businesses navigate the complexities of growth through acquisitions, the insights from this study may serve as a guide for achieving sustainable success in a challenging economic environment.
