Deadly sins and corporate acquisitions

ABSTRACT

Although having grown significantly to constitute a strong influence in several fields of business research, research on corporate acquisitions still needs fresh voices. Research on acquisitions is dominated by functionalist studies searching for ways to improve financial outcomes. In contrast, this paper draws on a narrative approach to provide a new perspective to corporate acquisitions. We focus on decision-makers and how a metaphor that highlights human foibles connected to sins can offer a new understanding of corporate acquisitions. Engaging with acquisition literature and underpinning our argument with examples from well-known acquisitions, provides a new way of understanding commonly identified but socially unaccepted outcomes from acquisitions generally described as unintended and unwanted.

KEYWORDS:

• Acquisitions
• decision-makers
• corporeality
• narrative
• metaphor

Introduction

Corporate acquisitions – when one firm buys another – are the result of organizational decisions with substantial consequences that take place at increasing numbers and financial values across the globe. Corporate acquisitions offer a rich soil for organizational research, and this growing research has covered different process phases (Haspeslagh and Jemison 1991), and benefited from a variety of theoretical perspectives, methods, and concepts (Graebner et al. 2017; Haleblian et al. 2009). Interestingly, a growing body of research illuminates hidden aspects of acquisitions, including forced identity transformation (Ernst and Schleiter 2018) or experiences of injustice (Melkonian, Monin, and Noorderhaven 2011). Despite a growing stream of insights, research into acquisitions can be enriched with new voices. Specifically, mainstream acquisition research focuses on improving financial performance by predicting value potential (Capron 1999; Makri, Hitt, and Lane 2010), how gains are realized during integration (Bauer and Matzler 2014; Larsson and Finkelstein 1999), and financial outcomes (King et al. 2004). To complement this research, we attempt to recast acquisition research by considering decision-makers and their motivations using narratives (Czarniawska 2004; Riad 2011; Riad, Vaara, and Zhang 2012).

Narrative approaches have provided important insights into multiple organizational aspects of acquisitions, including employee integration (Almor, Tarba, and Benjamini 2009; Rouzies, Colman, and Angwin 2019) and sensemaking in international acquisitions (Søderberg 2006). By relaxing essentialist assumptions, narrative approaches can provide new accounts of familiar or unfamiliar phenomena using objective facts (Czarniawska 1998). Current acquisition research largely views that acquisitions result from deliberate, socially accepted, and legal behavior (Trautwein 1990). Consistent with advice for a rejuvenation of acquisition research (Meglio and Risberg 2010), we draw on a narrative approach (Czarniawska 2004, 2011) that we believe identifies understudied aspects of acquisitions.

We develop a narrative of acquisitions using insights of ‘sins’, or enduring human shortcomings to gain a richer understanding of acquisitions. We build on a selective review of acquisition research with analytical focus on top management decision-makers behind acquisitions. In developing an alternative story, our narrative benefits from metaphor centering on sin, or darker sides of humanity, including unconscious, socially questionable, or forbidden behavior.

Providing a different way of understanding corporate acquisitions contributes to the growing research that complements the dominant performance-oriented research perspective. Specifically, our story centers on decision-maker urges and wants that are generally toned down in functionalist accounts of acquisitions. As a result, our narrative approach adds important insights by focusing on decision-makers, and thus places the findings from this study alongside the results of narrative research on employees in the integration process (e.g. Ernst and Schleiter 2018). Taken together, our study provides a new narrative key for understanding corporate acquisitions through the metaphor of seemingly eternal human foibles recognized in classic literature.

Our manuscript develops in multiple steps. We first develop our narrative approach to illuminate decision-makers in acquisitions combined with a metaphor of sin. We then outline how our conceptual development grew out of and in combination with a selective review of acquisition research before presenting a new narrative key for how acquisitions can be understood as emerging out of deadly sins and conclude by discussing the implications of our study for acquisition research.

Building a narrative of acquisition sins

A broad research tradition centers on individuals interpreting their situation using stories, or a narrative (e.g. Boje 1991; Feldman et al. 2004; Gabriel 2004). Applying a narrative is not new in acquisition research and, much like the wider organizational narrative research (Rhodes and Brown 2005), associated research spans different forms of data and approaches to mixing theoretical and methodological features (Riad 2011). Several studies have demonstrated the benefits of regarding employee stories in efforts to better manage integration efforts (e.g. Almor, Tarba, and Benjamini 2009). Narratives have also been used in studies concerned with financial outcome of acquisitions. For instance, Vaara (2002) explored how central concepts shape our understanding of acquisitions, such as success and failure are constructed discursively. Similarly, Riad (2005), elaborates how certain discourses can become dominating and raise resistance, and Riad (2011) explores contradictive elements in narratives of acquisition integration processes that highlight the ongoing and developing relation between metaphor and narrative. In a more recent study, Ernst and Schleiter (2018) elaborate how employees use metaphors to make sense of a merger. While demonstrating the potential in paying attention to narratives, these efforts mainly have focused on post-acquisition processes, and left open the application of narrative to enrich understanding of the overall acquisition process.

Specifically, we see potential in a narrative approach to provide an alternative story also of the decisions leading to an acquisition, or what is in traditional acquisition research considered the pre-acquisition phase, typically involving the decision to acquire and select a target (Haspeslagh and Jemison 1991). We build on Czarniawska (2004) who relates the narrative way of knowing to the logico-scientific mode. While sometimes juxtaposed as ends at a spectrum, the approaches are in fact related in more complex ways. For instance, narrative is part conveying insights, including traditional ‘scientific’ accounts. Still, compared to traditional empirical research, a narrative can offer new ways of seeing and interpreting since all social experience takes the form of narratives (Bruner 1986). By unshackling some of the traditional notions of how research should be presented, deliberate attention to narratives can liberate the medium through which ideas are conveyed. In this context, Polkinghorne (1987) emphasizes the concept of plot, or the creating of a meaningful whole from otherwise separate events. This means that new ways of learning emerge. Expressed in the words of Bruner (1986, 8), ideas can also emanate when they are ‘informal and “literary” rather than “systematic” in form.’

Importantly, rather than following a set, hegemonic plot, narrative approaches encourage and enable alternatives to traditional ways of knowing and a more liberating style to convey ideas. As summarized by Czarniawska (2004), a virtue of narrative is that it enables competing interpretations. Leaving aside the idea of perfect representation of any objective reality, narrative approaches can be said to move attention to the reality of conversation, while leaving other aspects open to negotiation between the text, the narrator, and the reader to place importance on the coherence and credibility of theoretical interpretation (Czamiawska 1993; Fisher 1985).

Traditional acquisition research on decision-making and cognitive processes largely rely on rationality (Amburgey and Miner 1992; Baker, Pan, and Wurgler 2012; Haunschild, Davis-Blake, and Fichman 1994; Kumar, Dixit, and Francis 2015; Matta and Beamish 2008; Roll 1986). In contrast, we weave our narrative plot around decision-makers in acquisitions. Inspired by Riad (2011), we combine a narrative approach with attention to metaphor. Metaphors are commonly used in organization and business research to capture notions beyond what may be immediately associated with a term. For example, scholars often draw on a metaphor of marriage to depict acquisitions (Al-Laham, Schweizer, and Amburgey 2010; Cartwright and Cooper 1993). We extend the application of narrative and metaphor in acquisition research to engage with the concept of sin.

Research process

Drawing on the metaphor of sin enables a narrative that makes humanity a central arena for understanding organizational decisions. It provides a relevant focus for discussing the hidden wants, unarticulated perhaps even to oneself, relevant to explaining the tendency that a majority of human decision-making during corporate acquisitions cause unwanted effects. This leads us to consider often hidden urges and needs often associated with shame and guilt that we find bears potential to be enriching acquisition research as such urges are less likely to be disclosed in interviews because managers are reluctant to talk about failed acquisitions (Lant, Milliken, and Batra 1992), and fall outside of the dominant functionalist theorizing from anonymous quantitative data. We take an additional step to connect a framework that depicts tendencies for immoral behavior, as emotional, dynamic, and multidimensional aspects of management are too often ignored (Huy 2012).

Emerging from an idea of ‘acquisition gluttony’ as a metaphor relating to the concept of ‘acquisition indigestion’ that represents an inability to integrate an acquired firm (Kusewitt Jr 1985; Laamanen and Keil 2008), inspiration grew to consider how acquisition research could be retold with specific attention to the idea of timeless human frailties, or sins. Inspired by the well-known seven deadly sins, emerging both in ancient philosophical and theological writing but also remaining relevant through modern literature and popular culture (as in Anthony Powell's novel cycle A Dance to the Music of Time or, more graphically, the film Seven), we considered sins as a well-known and useful metaphor for recasting motivations behind acquisitions.

With this metaphor in mind, we then engaged with influential contributions in research on corporate acquisitions. We benefit from and build on exhaustive reviews of associated research (cf. Graebner et al. 2017; Haleblian et al. 2009; King, Bauer, and Schriber 2018; Steigenberger 2017), as well as our own personal experience from within this research field. Following the examples of prior selective reviews focusing on the broad, underlying arguments (e.g. Armenakis and Bedeian 1999; Mosakowski and Earley 2000), we recast prior research and illustrate our argument with real acquisitions by paying attention to timeless human frailties.

We actively searched for and found support for the use of deadly sins in research; in brand management, marketing (e.g. Balmer 2001; Kotler 2004), and some writing using the term sins specifically in relation to lists of various mistakes in acquisitions (e.g. Feldman 2000; Tanner 1991). To make use of the metaphors of sin in relation to decision-makers, we reviewed acquisition research for aspects in acquisitions that exemplified the deadly sins. In line with a narrative approach, our plot emphasizes elaborating the narrative using colorful instances of sins rather than conceptually or empirically distinguishing potential overlaps between sins.

Our process also involved probing our own experiences from interviews or media examples illustrating sins. Concretely, this involved encountering data in light of existing theory complemented with our understanding of the seven sins, while also questioning our assumptions (Alvesson and Kärreman 2007) by matching and re-matching acquisition research with sins to strengthen the narrative plot. In this way, our process resembled what Mantere and Ketokivi (2013, 82) described as reflexive narrative ‘where researchers seek – through a dialogue between their own preunderstanding and the empirical data – a new understanding of theory through an evolution of their own understanding.’

Seven sins of acquisitions

Several shortcomings appear deeply rooted in humankind, and relate to well-known advice on how to avoid temptation. For instance, Italian medieval writer Dante Alighieri drew on ancient wisdom to list ‘seven sins’ – Lust, Gluttony, Greed, Sloth, Wrath, Envy, and Pride – to guide people away from deadly vices. These sins reflected eternal aspects to explain why people often want what is not good either for themselves or for others. The ‘seven sins’ offers an alluring metaphor to discuss negative outcomes of human behavior in organization research (Garden 2017).

Our insight that the seven deadly sins overlap with important findings make them useful for recasting acquisition research. Business research suggests concepts depicting less desirable or accepted traits, including Machiavellianism (Christie and Geis 1970) and narcissism (Campbell, Goodie, and Foster 2004). Still, the seven sins can complement ‘dirty’ personality traits (Jonason and Webster 2010). Simply, a narrative approach that considers decision-makers as the locus of ‘seven sins’ offers a new research perspective that focuses on the decisions leading to and shaping acquisitions.

Lust

Lust denotes intense longing or desire. It can be lust for wealth, recognition or power, and some of its more colorful connotations that are not far away from a metaphor of merging. Simply, executives are susceptible to a lust to acquire. In acquisition research, this is termed deal momentum or an escalation of commitment (Amburgey and Miner 1992; Cullinan, Le Roux, and Weddigen 2004; Pablo, Sitkin, and Jemison 1996). Research shows that firms taking the first steps toward acquiring may find it difficult to stop an initiated acquisition process in spite of new information indicating an acquisition is not prudent. For example, Hewlett Packard bought Autonomy, in 2011, and then later wrote off $8.8 billion dollars from due diligence missing multiple red flags (Cohan 2012). Further, share overpricing, goodwill write-offs, and subsequent acquisition intensity are closely related to each other (Gu and Lev 2011).

The risks from this sin are obvious. Acquisitions are usually leaps of faith with substantial financial and managerial resource investments that offer an uncertain future reward. Uncertainty is both fundamental and the result of negotiation tactics (Graebner 2009). Acquirers are therefore typically advised to proceed carefully and consider relevant information before finalizing a transaction. As the due diligence process evolves, firms typically find more information that may indicate the acquisition cannot create value.

Still, managers often experience an increasing momentum to close a deal from the excitement of the process, secrecy, and a ‘hunting instinct’ to control new resources (Jemison and Sitkin 1986). This results in overenthusiasm in acquisition plans (Seth, Song, and Pettit 2002) or entrenched managers that overpay even for low synergy targets (Harford, Humphery-Jenner, and Powell 2012). Managerial over commitment to a deal increases after publicly speaking in favor of the acquisition, and under competition for the target (Haunschild, Davis-Blake, and Fichman 1994). Dissenting voices may be considered incompetent or disloyal, and they can be ignored or actively scorned (Janis 1972). In 2009, Swedish state-owned utility Vattenfall's acquired Dutch Nuon for 13.3 billion USD, making Sweden's largest acquisition to date, as part of a northern European growth strategy (Hornby and Webb 2009). Public concerns of the risk of overpayment were voiced by Elsa Widding, an analyst at the Ministry of Enterprise and Innovation, but they were swept aside. Hence, rather than lack of information, what was later labeled a ‘catastrophe’ (Öhrn 2014) appears driven by a lust to acquire.

Gluttony

Gluttony involves overindulgence and overconsumption. While a potential fast track to growth, market entry, and new capabilities, too many acquisitions or too large an acquisition can exceed what can be digested or overtax an acquirer's managerial capacity (Lamont et al. 2019; Zorn et al. 2017). For example, IBM's acquisition of Red Hat for $33 billion equals the combined value of all the deals completed by IBM for 15 years, and it represents roughly 30% of IBM's total value (Greene 2018). Problems result when acquisitions exceed resources for due diligence and integration that contribute to less desirable acquisition outcomes (Lamont et al. 2019). Frequent acquirers are especially likely to overpay in subsequent deals (Kim, Haleblian, and Finkelstein 2011). Even though target size seems to lower the overpayment risk (Alexandridis et al. 2013), the real problem often starts with integration demands overwhelming managers, as executives that lapse into gluttony conduct deals that are too big or too frequent (Krug, Wright, and Kroll 2014; Laamanen and Keil 2008). This is in line with studies showing that large deals destroy more financial value compared to smaller ones (Alexandridis et al. 2013). In the end, executives and their organizations end up with indigestion resulting in a muddy and uncontrollable organization. This problem also exists when acquiring a firm that recently made an acquisition (Zorn et al. 2017).

The reasons for gluttonous acquisitions are the same as with other transactions – market share, technology or patents, and the difference lies in their frequency or size. Otherwise suitable targets can become burdens, if acquisitions take place in too short a timeframe. Similarly, research shows that mergers of equals consistently perform badly in financial terms, and one reason is they are too large (Alexandridis et al. 2013; Campbell, Sirmon, and Schijven 2016; Moeller, Schlingemann, and Stulz 2005). For example, the combination of AOL and Time Warner in 2000 in a $350 billion combination ranks among the worst mergers of all time. The deal followed the CEOs meeting in China in 1999, and it was a shock to employees, exhibited clashing cultures and lost a single investor, Ted Turner, an estimated $8 billion (Arango 2010). Impossible to digest, the merger was split up ten years later (Telegraph 2009), arguably earning the transaction the position as the single most famous example of acquisition gluttony.

Greed

In most societies, striving for wealth is legitimate, and top managers are often rewarded handsomely. In itself, greed has been proposed as an important driver of accepted or even wanted behavior. For instance, rather than wishing to tone down managers wanting wealth, agency theory commonly suggests aligning monetary ambitions for managers with shareholder returns (e.g. Kesner, Shapiro, and Sharma 1994). Still, striving for wealth can become excessive (Rippin 2007). When desire for wealth turns into a willingness to enrich oneself at the expense of others, the result is greed, or a harmful desire for material wealth (Hambrick and Finkelstein 1995). This is especially provocative as a 2016 study by MSCI, a corporate-governance firm, finds the best-paid CEOs run some of the worst performing companies (MSCI 2016). Interestingly, CEO compensation changes can be explained by changes in firm size due to acquisitions in cases of passive monitors (Wright, Kroll, and Elenkov 2002).

In the context of acquisitions, greed has been found to drive acquisitions with a varying degree of benefits attributed to managers (Mueller 1969). For instance, managing a larger firm correlates with higher manager pay and prestige (Hambrick and Finkelstein 1995). While corporate governance systems work to align manager and owner interests, there is evidence CEOs talk about acquisition value creation to only exercise stock options with the implication they do not expect long-term value creation (Devers et al. 2013). The movie Barbarians at the Gate depicting RJR Nabisco illustrates a lifestyle available to few, but possibly tempting too many. For example, Tyco CEO Dennis Kozlowski, used company funds to pay for his wife's birthday party in Greece as part of a corruption scandal estimated to total $600 million (Fuchs 2014). In contrast, family-owned firms tend to conduct fewer and smaller acquisitions, equal to a less carefree spending behavior (Miller, Breton-Miller, and Lester 2010), suggesting greed – at the expense of customers, competitors, or owners – is a managerial motive behind acquisitions consistent with an agency problem (Fama and Jensen 1983). For example, Elon Musk's acquisition of SolarCity by Tesla may be self-serving (Tobak 2016). Simply, it used Tesla's higher stock price, but criticism of the combination was associated with shares in both companies falling (Lienert and Baker 2016). Interestingly, while some display their wealth publicly, media coverage of executive excessive behavior offers a form of corporate governance (Liu and McConnell 2013) that may mitigate this problem.

Sloth

If increased desire is a source of problems, a lack of desire can also result in problems. Sloth refers to a range of conditions centering on lack of enthusiasm, effort, and interest. Again, the complexity of acquisitions makes early mistakes easy to make, but expensive to correct (Jemison and Sitkin 1986). Consistent with the aphorism ‘the chase is better than the catch’, the work that follows acquisitions often surprises acquiring firm managers (Gomes et al. 2013). Even if managers perceive that the battle is over with deal closing, ‘the battle has just begun […] and wońt come without a lot of blood, sweat, and tears’ (Welch 2005, 218).

Ultimately, poor planning (De Noble, Gustafson, and Hergert 1988) and lack of enthusiasm will create less beneficial conditions during integration, including fewer synergies, and more resistance (Meyer 2008). This is in line with research finding that quick human integration increases internal reorganization goal achievement and acquisition performance (Bauer, King, and Matzler 2016). Compounding additional workload that comes with integration, job cuts can lead to employee burnout and turnover that leaves work half-finished and no clear path forward. Acquisition research has identified resulting problems as merger syndrome (Sarala, Vaara, and Junni 2017). For example, problems following the combination of United and Continental airlines led to months of passenger disruptions from a botched integration of reservation systems that, in 2012, led to a public apology placed in full-page ads in major newspapers by United's CEO Oscar Munoz (Kieler 2015). In a later interview, he stated in an interview the larger problem was United's 85,000 employees were ‘disengaged, disenchanted, disenfranchised’ (Pontefract 2015).

These challenges can be mitigated through more careful integration planning that considers human issues (Meglio, King, and Risberg 2015). Human issues resulting from acquisitions are often a secondary consideration in traditional research (Sarala, Vaara, and Junni 2017). The oversight is noteworthy as target firm employees experience three times higher turnover following an acquisition, and higher turnover rates can persist for as long as 10 years after an acquisition (Krug and Shill 2008; Krug, Wright, and Kroll 2014). Trauma associated with acquisitions impacts employees, and it can lead to suicide (Auster and Sirower 2002; Covin et al. 1996; Buono and Bowditch 2003).

Wrath

Strong emotions are often part of acquisitions (Haleblian et al. 2009; Kiefer 2002; Kusstatscher and Cooper 2005). Wrath is associated with anger, especially when it is unmotivated or directed against innocent people without deliberate control. Managerial rage can take control during acquisitions and leave little room for rational analysis leading to internally presenting and punishing a scapegoat or an externalization of the concept of the enemy (Kilduff, Elfenbein, and Staw 2010) that contributes to increased political behavior inside combining firms (Clougherty and Duso 2011) or to cutthroat rivalry with other firms in an industry (Nalebuff and Brandenburger 2011).

Between combining firms, acquisitions that are hostile also risk organizational resistance by presenting people with ‘us versus them’ situations that hinder coordination and reaching operational goals (Sinkovics, Zagelmeyer, and Kusstatscher 2011). Even employees that previously welcomed an acquisition often engage in political behavior that increases conflict (Dao et al. 2016; Vaara 2003). Internal conflict is a major source of acquisition failure (Jandik and Makhija 2005). Once begun, political behavior and internal conflict are difficult to overcome (Krug, Wright, and Kroll 2014), as each perceived slight leads to escalation over the desire to get even. For example, over a decade Citigroup's share price fell $10 following multiple management shake-ups following the creation of Citigroup from Travelers and Citicorp in 1998 (Dash 2008), illustrating the influence of wrath in acquisitions. Additionally, a final acquisition decision we are familiar with was made in wrath when a CEO screamed in a taxi ‘Let's get those b******s!’ While emotions are part of constructing meaning during acquisitions (Kiefer 2002), a consideration of emotions is not consistently considered by acquisition research (Huy 2012).

With rival firms, overly aggressive behavior including responding to acquisitions with another acquisition can be a poor strategy (McNamara, Haleblian, and Dykes 2008; Laamanen and Keil 2008). Resulting rivalry can drive acquisition prices above rational levels (Varaiya and Ferris 1987), or drive counterproductive pricing to poach customers (Krüger and Müller-Stewens 1984). The impact of emotions and rivalry is well known by sellers who prefer auctions to sequential processes because it increases the price (Bulow and Klemperer 2009), where wrath appears a common but underestimated emotion in acquisitions.

Envy

Envy is the wish to have something that belongs to someone else whether possessions, talents, or status. It is distinct from the wish to join in with someone else, and instead has an element of wanting something at the expense of others. In acquisitions, CEO envy of peers with higher compensation from performing acquisitions can drive acquisition activity (Goel and Thakor 2010). Additionally, managers may simply imitate the strategy of other firms. This phenomenon can result in bandwagon behavior from mimetic isomorphism, and it has been detected among competing entry strategies (Xia, Tan, and Tan 2008) or acquirers (Moatti 2009; Yang and Hyland 2012; Tseng and Chou 2011). Possible reasons for these observations relate to envy driving managers to seek: (1) legitimacy, (2) media coverage, or (3) higher prestige and pay from managing a larger firm. However, imitating acquisitions are associated with lower performance (Haleblian, McNamara, and Kolev 2012). For example, when not driven by strategic considerations, acquisitions often provide insufficient consideration of associated costs (Clougherty and Duso 2011). In other words, envy can lead decision-makers astray by leading them to make irrational acquisitions.

Pride

While pride can take the form of positive identification with an organization (Dutton, Dukerich, and Harquail 1994), the final deadly sin of pride relates to hubris, or an overestimation of one's ability. Essentially, every acquisition involves pride, as making an acquisition inherently assumes acquiring firm managers can run a target firm better. However, a positive pride in one's own abilities is different from overestimating them, or a systematic inability to recognize own inabilities, and therefore assuming performing above average, sometimes labeled the ‘Dunning-Kruger effect’ (Kruger and Dunning, 1999; Dunning 2011). CEO overconfidence is associated with higher number of acquisitions – but worse outcomes (Liu, Taffler, and John 2009). This is related to the fact that acquirers typically pay a premium ranging between 30 and 50% above the share price before the acquisition (Laamanen 2007). For example, IBM is paying a 63% premium for Red Hat (Witkowski 2018). In other words, improved the financial performance requires IBM achieve over a 63% increase in efficiency (cost reduction) or revenues above what Red Hat was able to achieve alone. The single most credible explanation for high premiums are not expected synergies, but overly positive assumptions about the values the acquirer can create, or managerial hubris (Roll 1986). Research has associated overpayment as a consistent way to lose money on acquisitions (Sirower 1997).

Proud executives also create social distance and display moral superiority by ignoring or overruling opinions, advices, and feelings of others. Resulting wounded pride of target managers and employees can lead to their marginalization, political behavior, open resistance, or personnel turnover that limits benefits from an acquisition (Chreim and Tafaghod 2012; Paruchuri, Nerkar, and Hambrick 2006). For example, ThyssenKrupp's expansion from Germany into Brazil displayed the negative consequences of pride, and the executives’ feeling of superiority contributed to losses that exceed $5 billion (Economist 2013). As a result, pride on the part of an acquirer may help to explain problems in cross-border acquisitions.

Discussion

Managers are human, and to err is human. We recast existing research to consider the dark side of human nature (sin) and broaden traditional perspectives using narrative and metaphor (e.g. Riad 2011) to develop how managers err during acquisitions. We set our study in the context of corporate acquisitions, and provide a new narrative key for decision-making in acquisitions. In Table 1, we summarize how considering sins relates to existing acquisition research, as well as symptoms and insights from our resulting narrative.

Table 1. Summary of acquisition sins.

Sin	Sin in an acquisition context (and associated concepts)	Symptoms
Lust	Escalation of commitment for a deal and over reliance on acquisitions (deal momentum, over commitment, “hunting instinct”, group think)	Ignoring negative information or dissenting opinions
Gluttony	Pursuing acquisitions that are too big or too frequently (indigestion)	Frequent acquisitions, or merger of equals
Greed	Managerial motives for higher pay and prestige of managing a larger firm (agency)	High CEO pay and/or negative media coverage
Sloth	Lax acquisition implementation (poor integration planning and management)	Employee burnout, turnover, and suicide
Wrath	Emotional decisions colored by personal animosity (revengeful and political behavior, competitive retaliation, “us versus them”)	Anger, or aggressive behavior
Envy	Conducting acquisitions because other firms are making acquisitions (mimetic isomorphism)	High acquisition activity
Pride	Overly positive assumptions about the values the acquirer can create (hubris, overconfidence, “Dunning-Kruger effect”)	High acquisition premium

We review and integrate acquisition research that is often dominated by concerns over improving financial performance. Decades of acquisition research suggests that on average acquisitions fail to improve acquiring firm performance (King et al. 2004), or even create huge financial losses (Moeller, Schlingemann, and Stulz 2005). This research in itself is a narrative (Czarniawska 2004) that works to perpetuate certain stories about acquisitions, and what aims and effects are legitimate, at the expense of others. For instance, despite layoffs being a common result (Krishnan, Hitt, and Park 2007), employee concerns are overshadowed by research on shareholder wealth (Spraggon and Bodolica 2011). In contrast, we argue that a narrative based on human shortcomings offers insights associated with unwanted acquisition outcomes. Using sin as a metaphor, we are able to recast the reasons behind often unwanted acquisition outcomes. Our focus on human sins complements earlier efforts to balance a predominant research focus on empirical examination on ever-finer measures of financial outcomes (Meglio and Risberg 2011).

Moreover, our study assists in redirecting acquisition research. Our specific focus has been on decision-makers rather than decision-making. There is a rich literature on how different cognitive dispositions affect strategic decision-making in the context of acquisitions (e.g. Baker, Pan, and Wurgler 2012; Haunschild, Davis-Blake, and Fichman 1994) or the influence of personality traits such as narcissism on decision (Chatterjee and Hambrick 2007). Relatively less attention is given to decision-makers in acquisitions and less still on the corporeal aspects and the roles these may play.

In this context, our study complements the perspective inherent in recent efforts to delve deeper into decision-makers’ neural processes during decision-making (Laureiro-Martínez et al. 2015). The value of drawing on ancient insights developed outside of the traditional business sphere has been shown earlier in business research (Rousseau 2009; Strati 2007). By centering on aspects on the dark side of human decision making, our study outlines a new plot or meaningful whole (Polkinghorne 1987) for reasons brought forward in research addressing poor acquisition decisions.

Our narrative on sins complements prior research by moving focus from the integration to include also the pre-acquisition phase. While vivid accounts exit of how employees are affected by acquisition integration creating stress and anxiety (Schweiger, Ivancevich, and Power 1987; Seo and Hill 2005) may explain over one-third of all employee turnover (Breinlich and Niemann 2011), there is more to gain from considering human aspects of acquisitions. By integrating problems from acquisitions using a narrative, voice is given to how research and managers can better understand and manage employee reactions (Almor, Tarba, and Benjamini 2009; Soderberg 2006). For instance, our research contextualizes and extends narratives of how middle managers experience selling their souls in a Faustian contract with Satan (Ford and Harding 2003).

Taken together, this study has provided a new narrative key regarding acquisitions. A narrative approach recognizes that essentially, knowledge is conveyed through stories, and plots combining earlier recognized aspects in new ways allow weaving new narrative providing new understanding. Inspired by the combination of narrative and metaphor in the context of acquisitions (Riad 2011), our focus on sin in decision-makers behind acquisitions combines insights from established acquisition research that, we hope, offer new insights.

Conclusion and future research

Our study contributes in several ways to scholarly work on corporate acquisitions. First, research on acquisitions is still dominated by a focus on improving financial outcomes. Our study joins and contributes to a growing stream of research delving into alternative views of acquisitions. Second, drawing on the metaphors of sin, our narrative is woven around the decision-makers behind acquisitions and thereby complements research on ways to improve decision-making in acquisitions. Third, our focus on sin highlights how humans often suffer during acquisitions and contributes by elaborating the consequences of regarding sin with decision-makers during the period before acquisitions. Fourth, our overall and primary contribution is to develop a new perspective of acquisitions. This allows recasting acquisition research around a narrative where human shortcomings play a part in acquisitions, thus answering to calls pursue more fundamental insights (Alvesson 2013; Vermeulen 2018) in the context of corporate acquisitions.

Our study is not without limitations, and several relate to potential for future research. One limitation is that our approach has been focusing on decision-makers. While our narrative also highlights the impact on employees and resulting emotions, how to mitigate negative impacts of acquisitions on employees deserves additional research attention. We have been touched in interviews for instance by a manager who provided a poignant response about telling employees that they would lose their jobs following their bakery being acquired: ‘There was one guy, he only worked part-time, he had worked in a bakery before, got stuck with his arm in a machine somewhere, so he could only use one arm. He said, tears in his eyes: “I’ll never find another job.” He was 51, part-time pensioner, and with one healthy arm … ’ Beyond the employee losing his job, the manager also suffered from the experience, exemplifying why research into the human effects are tellingly labeled ‘impact studies’ (Schweiger and Walsh 1990), and more narratives to understand these impacts are needed.

Our study focuses on what is generally seen as negative, and highlighting sin enables directing attention to a new perspective of acquisitions. However, it needs said that not all human actions are sinful. Moreover, consideration of acquisition sins also risks research on human shortcomings legitimizing them (Ghoshal 2005), and good intentions of counteracting sins may play out in complex ways. For instance, excessive control may actually counteract reaching strategic goals as performance of intrinsically motivated may punish principals when they perceive excessive control as signs of lack of trust, or greed (Falk and Kosfeld 2006; Goranova et al. 2017). While this must be taken seriously and a paradigmatic neglect of self-interest may leave acquisition theory unable to understand certain behaviors, we also believe there are benefits to address more positive human traits, and we hope our study can inspire more research along the lines outlined here.

Lastly, the negative connotations of ‘sins’ may be overly simplistic, and a more nuanced view holds that negative traits may still provide positive outcomes. For instance, above average confidence has been associated with an ability to lead, accept risk, and take on challenges (Shipman and Mumford 2011, p. 649). Additionally, recent CSR research suggests acquisitions can be employed to further societal values (Park, Meglio, and Schriber 2019). In itself, future acquisition research can benefit from addressing the nuances of different outcomes. However, this does not deny that overly confident decision-makers can have negative outcomes and our developed narrative complements traditional, empirical accounts of acquisitions. The striking effects of acquisitions can be illustrated by a well-known example. The DaimlerChrysler merger; later called a ‘poster-child of failed mergers’ (CNN Money 2007), meant over 35,000 employees lost their livelihood and suffered associated trauma. This underscores that searching for new understanding of corporate acquisitions is a worthy cause.

Disclosure statement

No potential conflict of interest was reported by the authors.