No. 36: What Matters for Organizing M&As Successfully?

We examine the association between firm-internal merger and acquisition (M&A) process organization and acquisition success, addressing the black box of unobservable firm-specific return drivers. Using unique survey data from global M&A experts and a Heckman two-stage selection model to correct for participation bias, we construct indices for process standardization, duration, and attention. At the aggregate level, these process attributes are significantly and positively associated with M&A success (marginal effects of 7.2%, 3.1%, and 19.3%, respectively). However, functional involvement reveals significant agency costs and information asymmetries. While Top Management Team (TMT) and Business Unit (BU) management involvement generally improves outcomes, sub-process analysis identifies a participation paradox. Consistent with managerial hubris, TMT involvement in target valuation is associated with an 18.6% decline in success, whereas Headquarters functions, serving as objective monitors, improve valuation outcomes by 18.0%. Conversely, reflecting information asymmetries, Headquarters-led target search correlates with a 9.5% performance penalty, while decentralized BU involvement in search creates value. Our findings suggest that superior acquirer performance stems from an optimal division of labor that aligns organizational layers with their comparative cognitive and informational advantages, rather than mere functional presence.