PLANNING FOR A SUCCESSFUL MERGER ©Journal of Global Business and Technology, Volume 1, Number 2, Fall 2005 1 PLANNING FOR A SUCCESSFUL MERGER OR ACQUISITION: LESSONS FROM AN AUSTRALIAN STUDY Jarrod McDonald, Max Coulthard, and Paul de Lange1 ABSTRACT Mergers and acquisitions (M&As) continue to be a dominant growth strategy for companies worldwide. This is in part due to pressure from key stakeholders vigilant in their pursuit of increased shareholder value. It is therefore timely to identify key planning steps that will assist CEOs and company boards to achieve M&A success. This study used semi-structured interviews to: identify the link between corporate strategic planning and M&A strategy; examine the due diligence process in screening a merger or acquisition; and evaluate previous experience in successful M&As. The study found that there was a clear alignment between corporate and M&A strategic objectives but that each organisation had a different emphasis on individual criterion. Due diligence was also critical to success; its particular value was removing managerial ego and justifying the business case. Finally, there was mixed evidence on the value of experience, with improved results from using a flexible framework of assessment. 1 Jarrod McDonald, BBus.Com (Hons): has been employed at Monash University in the Faculty of Business and Economics as a Tutor and Research Assistant. His research interests include mergers and acquisitions and taxations issues facing investors, in particular share buybacks. He has been published in academic and professional journals. He is now employed in the financial services industry and is an Affiliate of the Securities Institute of Australia. Max Coulthard, M.B.A.: is a Lecturer and Unit Coordinator in International Business, Department of Management at Monash University, Melbourne, Australia. His teaching and research interests include entrepreneurship, international business and franchising. Max has written 17 refereed publications and coauthored three books. He is currently completing his PhD investigating the effect of entrepreneurial orientation on firm performance. Paul A de Lange, PhD: is an Associate Professor in the School of Accounting and Law at RMIT University, Melbourne, Australia. Paul teaches in a variety of Financial Accounting units to both graduate and undergraduate students. His research interests include management, accounting education, financial accounting issues and auditing. He has presented research papers at both national and international conferences and has published over 20 refereed publications. The authors gratefully acknowledge the reviewers and participants of the Global Business and Technology Association, 2005 International Conference, for their constructive comments on earlier versions of this manuscript. We are also thankful to the participants who agreed to be interviewed for this research. Jarrod McDonald, Max Coulthard, and Paul de Lange 2 ©Journal of Global Business and Technology, Volume 1, Number 2, Fall 2005 INTRODUCTION Growth continues to dominate the minds of CEOs and their Boards. Mergers and Acquisitions (M&As) has been one of the favoured methods of achieving growth targets and appeasing key stakeholders, vigilant in their goal to increase shareholder value. Given past high failure rates of M&As, it appears timely to identify effective planning practices that enhance the chances of their success. In 2004, worldwide M&A activity increased by over 40% to $1.95 trillion resulting in the highest M&A activity levels since the year 2000 (Thomson, 2005). This growth in activity is interesting to note considering that research has shown that, historically, approximately half of all mergers and acquisitions have proven unsuccessful (See Covin, Kolenko, Sightler & Tudor, 1997; Gadiesh & Ormiston 2002; Gadiesh, Ormiston & Rovit 2003; Kaplan 2002; Stanwick & Stanwick 2001; Weber, Shenkar & Raveh 1996; Schneider 2003). In contrast to previous research,