Target screening: a key strategic success factor for acquisitions

Florian Bauer and Mai Anh Dao

Chapter 2 in A Research Agenda for Mergers and Acquisitions, 2024, pp 41-64 from Edward Elgar Publishing

Abstract: Acquisitions are a core strategic tool for corporate development. Despite the practical relevance and the increased research interest, acquisitions on average fail. Failure is typically attributed to poor integration; implicitly this assumes that firms can identify and acquire the best fitting target in the first place. This is problematic and we take a closer look at the target screening phase of an acquisition. During target screening, an acquirer can translate the strategy into screening criteria and after an evaluation of potential targets, creating an actionable shortlist. However, while this process appears to be straightforward or textbook like, we find through qualitative research that the practices managers employ during target screening give rise to heuristics and cognitive simplifications that trigger cognitive biases. This offers a novel explanation for why many acquisitions fall short in creating value.

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