Heuristics in pre-merger processes

David Santana, Thi Nguyen, Nicola Mirc and Audrey Rouziès

Chapter 1 in A Research Agenda for Mergers and Acquisitions, 2024, pp 17-40 from Edward Elgar Publishing

Abstract: The complexity and uncertainty surrounding acquisitions can lead to bounded rationality in decision-making. We examine the pre-deal process in M&As from a cognitive perspective, offering a novel examination of the role of heuristics employed by involved actors, such as managers, consultants, and legal advisors. These professionals use cognitive tools to manage and simplify complex decisions under conditions of uncertainty and time pressure. We study the use of heuristics across various sub-phases of the pre-deal process, including target identification, due diligence, and negotiation, and offer a framework for understanding their application. We develop the antecedents and outcomes of heuristics in these stages and identify several relationships and potential research avenues. The potential benefits of efficient decision-making and communication and the risks associated with biases and oversimplification are highlighted. Applying heuristics can enable acquisition research to identify ways to increase M&A success.

Keywords: Business and Management; Economics and Finance (search for similar items in EconPapers)
Date: 2024
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