TY - JOUR AU - Kaplan,Steven N. AU - Mitchell,Mark L. AU - Wruck,Karen H. TI - A Clinical Exploration of Value Creation and Destruction in Acquisitions: Organizational Design, Incentives, and Internal Capital Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 5999 PY - 1997 Y2 - April 1997 UR - http://www.nber.org/papers/w5999 L1 - http://www.nber.org/papers/w5999.pdf N1 - Author contact info: Steven N. Kaplan Booth School of Business The University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-4513 Fax: 773/702-0458 E-Mail: steven.kaplan@chicagobooth.edu Mark Mitchell Graduate School of Business Administration Harvard University Morgan Hall 125 Boston, MA 02163 Tel: 617/495-1014 E-Mail: mmitchell@cnhpartners.com Karen Wruck Maxx M. Fisher College of Business Ohio State University Fisher Hall 832 2100 Neil Avenue Columbus, Ohio 43210-1144 Tel: 614/688-5443 Fax: 734/939-6054 E-Mail: kwruck@cob.ohio-state.edu AB - This paper presents clinically-based studies of two acquisitions that received very different stock market reactions at announcement one positive and one negative. Despite the differing market reactions, we find that ultimately neither acquisition created value overall. In exploring the reasons for the acquisition outcomes, we rely primarily on interviews with managers and on internally generated performance data. We compare the results of these analyses to those from analyses of post-acquisition operating and stock price performance traditionally applied to large samples. We draw two primary conclusions. (1) Our findings highlight the difficulty of implementing a successful acquisition strategy and of running an effective internal capital market. Post-acquisition difficulties resulted because: (a) managers of the" acquiring company did not deeply understand the target company at the time of the acquisition; (b) the acquirer imposed an inappropriate organizational design on the target as part of the post-acquisition integration process; and (c) inappropriate management incentives existed at both the top management and division levels. (2) Measures of operating performance used in large sample studies are weakly correlated with actual post-acquisition operating performance." ER -