Merging Professional Service Firms

Royston Greenwood, C. R. Hinings and John Brown
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Royston Greenwood: Centre for Professional Service Firm Management, Faculty of Business, University of Alberta, Edmonton, Alberta, Canada T6G 2R6
C. R. Hinings: Centre for Professional Service Firm Management, Faculty of Business, University of Alberta, Edmonton, Alberta, Canada T6G 2R6
John Brown: Centre for Professional Service Firm Management, Faculty of Business, University of Alberta, Edmonton, Alberta, Canada T6G 2R6

Organization Science, 1994, vol. 5, issue 2, 239-257

Abstract: The prevailing theory of mergers is that firms emphasize considerations of “strategic fit” in discussions prior to merger activity, and neglect considerations of “organizational fit”. The result is that immediately following a merger dysfunctional organizational behaviours occur. The number of empirical studies of mergers, however, is relatively modest and there are few case studies of the merger process. The present paper studies the merger involving two large accounting firms, over a period of four years. The unique features of accounting firms—in particular, their organization as professional partnerships—and of the accounting industry, make the case study an appropriate “tough” test of the general theory. Accounting firms are likely to take account of organizational fit in merger discussions.The case study rehearses the careful attention to issues of strategic and organizational fit (contrary to the general theory) but also maps the unfolding behavioural problems that followed formal merger. Interestingly, the specific difficulties observed in previous studies were less salient in the present case: problems and difficulties were of a kind peculiar to the type of organization, which suggests that theories of mergers should be sensitive to the context and setting of merger activity.The paper concludes by elaborating elements of a more systematic model of the merger process. These elements include the difference between mergers and acquisitions, the structure of governance, organizational capacity, sector cohesiveness and technology.

Keywords: mergers; professional partnerships; change (search for similar items in EconPapers)
Date: 1994
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