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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2024 Grand Challenge: Business Resilience
Market-Based Solutions to Vital Economic Issues
Feb 28, 2023

Acquisitions of divested business units: A typology and strategies for success


Acquisitions are notoriously difficult to execute successfully. Poor implementation of the post-acquisition integration process is a major source of acquisition value destruction. To surface new solutions for this vexing problem, we leverage the emerging triadic view of M&A activities, which emphasizes the interconnectedness between sellers, acquirers, and the units that are transferred between them. We apply the triadic lens to acquisitions of divested business units, and find that a unit’s experiences with its seller before and during divestiture can profoundly shape the unit’s needs and expectations which, in turn, must be addressed by the acquirer in the integration process. We surface four key mechanisms (status, resource accessibility, trust, self-sufficiency) that underpin the seller’s impact on the divested unit, and develop a typology (Favored, Neglected, Shocked, and Independent units) that animates the ramifications of the seller’s actions. Then, for each type, we discern strategies for their post-acquisition integration execution that are tailored their distinctive needs, which originate from their experiences with the seller. To make these insights practical and readily implementable, we provide a diagnostic checklist for identifying the four types of divested units and offer an action plan of type-specific strategies for successfully managing them in the post-acquisition integration process.

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